Fiscal Citizenship and Migration

Migration, Trust and Tax Morale

Eva Matthaei, Charlotte Schmidt, Benno Torgler

This paper investigates the influence of the personal migration background on the tax morale of individuals in Europe. Using data of the Integrated Values Survey, we provide evidence that first-generation immigrants have higher tax morale than non-immigrants and that the difference is driven by an indirect relation. Among other factors, trust in the host country institutions acts as a mediator between immigration and tax morale. Consistent with prior political sciences research, immigrants in Europe exhibit significantly higher levels of trust in national governments, courts and the public administration of their respective host countries than the rest of society within the countries. This trust in return is significantly positively associated with tax morale. Our further analysis provides evidence of strong heterogeneity regarding the relationship between immigration and tax morale as well as between immigration and institutional (vertical) trust. The size and significance of both associations depends on whether or not the parents of an immigrant are immigrants too as well as on the level of integration into the host country.

Preferences for Financing and Spending Taxes in Heterogenous Societies

Martin Fochmann, Dirk Kiesewetter, André Machwart

An experimental vignette study investigates the impact of migration status on individuals’ preferences regarding the use of tax money in German society. For this purpose, people with a migration background and Germans are confronted with fictitious scenarios that systematically vary in two dimensions: (1) participants’ financial status and (2) the financial status of his or her ethnic ingroup. In both dimensions, the financial status – measured against the cross-section of the (fictitious) society – is determined to be either strong or weak. Based on this information, the participants decide on the use of tax revenues (redistribution or general purposes (e.g., internal security)) and the tax rate for the different financial groups. The share of ethnic ingroup in the total (fictitious) population is exogenously determined to 50 percent. In this experimental design, the participants are partly confronted with trade-offs between their individual financial interests and the interests of their ethnic ingroup. For example, it can be investigated whether people’s willingness to redistribute tax money increases if the beneficiaries have an identical migration status. This study mainly focuses on the preferences of people with a migration background. It will be examined whether and under which circumstances the characteristic of a (common) migration background induces intergroup differentiation processes. For this purpose, participants with a migration background are either (1) informed about an identical origin with the other (fictitious) immigrants in society or (2) it is assumed that the (fictitious) migrants have immigrated from different countries.

The role of tax advisors

Dirk Kiesewetter, Till-Arne Hahn, Josef Wunderlich

In recent years public opinion seems to increasingly associate tax advisory with barely legal tax avoidance. This is in sharp contrast to the role that legal and accounting research attribute to tax advisors. This paper explores and compares the self-image of the tax advisory communities in Canada, Germany, and the UK with a special emphasis on small practitioners who by far outnumber those professionals working for the Big 4 firms and with a second focus on the effect of migration on tax practitioners’ work. The following questions are to be addressed:

• To what extent do tax advisors see themselves in the role of tax law enforcers or exploiters?
• Do tax advisors attribute themselves a third role as an educator of their clients?
• Do tax advisors feel a pressure from the side of their clients to be more tax aggressive?
• Does the self-image of tax advisors differ between the three countries?
• Do advisors in non-regulated markets (Canada and the UK) describe themselves differently from those in a market with legally regulated access (Germany)?
• How does migration affect the work and the role of tax advisors in their own perception?
• Do migrants expect a different kind of service or attention from their tax advisor?
• Do migrants show attitudes towards taxes, tax authorities or the state that differ from the home population?
• Has the attitude of national clients changed in the face of increasing or changing migration?
• Does migration affect the services provided to national clients? (marriage, emigration, employment of migrants, etc.)

The UK`s ´hostile environment´: implications for fiscal citizenship

Lotta Björklund Larsen, Oliver James, Lynne Oats & Felix Wilson

The UK’s ‘hostile environment’ for migrants announced by then Home Secretary, Theresa May, in 2012 without the usual underpinning policy documents. The emergence and sedimentation of the ‘hostile environment’ saw a range of third parties becoming responsible for monitoring the immigration status of people under their control and in their care. The Home Office embarked on Operation ‘Vaken’, a strong messaging campaign to encourage illegal immigrants to ‘go home’.  Around the same time, Her Majesty’s Revenue and Customs (HMRC) also embarked on a publicity campaign to deter tax evasion, including the ‘spooky eyes’ posters to signal that the hidden economy was under scrutiny. How are these events connected, if indeed they are connected?

We argue that both campaigns are emblematic of a specific approach to governing, drawing on behavioural science.  In the UK, as is common elsewhere, government departments largely operate separately from each other. Yet in the minds of ordinary citizens, all of ‘government’ is interconnected. It is not unreasonable to think that what happens in the Home Office in relation to migration will spill over into willingness to pay taxes. The use of behavioural science to inform policy making and influence public sector ‘campaigns’ has grown rapidly in a very short space of time, without much in the way of critical evaluation. The wider impact on fiscal citizenship is certainly not well understood.

Taxation Policy as Migration Policy: A Cross-Country Legal Comparison

Jennifer Farrell, Till-Arne Hahn, Oliver James, Angelika Mohr, Lynne Oats, Ralf P. Schenke, Kim-Lee Tuxhorn, Felix Wilson

Tax policy as migration policy refers to legal rules in the area of tax law, that are aimed directly or indirectly at migrants, and which may encourage or discourage certain types of migration.

The three countries studied approach this matter differently. At first glance it seems that the respective approaches could be placed on a sliding scale to indicate the extent to which they employ tax policies to achieve migration policy objectives: Canada makes the most liberal use of such policies, whilst the UK employs them to effect certain outcomes in the context of migration. In Germany, such policies are not currently in effect. Their legal admissibility remains a hypothetical question, which may affect future policy considerations.

An in-depth legal comparison paints a more complicated picture. The current policies in Canada and the UK have different aims. In Canada, the goal is to attract highly qualified migrants and to discourage undesirable behaviours associated with migration. In the UK, special tax rules focus on attracting and keeping very wealthy foreign individuals in the country and encouraging them to invest their money in the UK. In Germany, a legal analysis shows that such approaches might generally be justifiable under German constitutional law, although this depends on the specifics of such policies.