“Taxation and cross-border workers’ income”
“The financial crisis has led governments around the world to raise taxes, cut credits, reduce or abolish deductions, and even target pensions. More and more of us are paying higher taxes while seeing a reduction or removal of social benefits. Yet few consider the implications for a large and growing sector of the labour force: migrant workers. I have recently joined a major tax conference in Austria, and further would like to relate the discussions with the findings in my PhD thesis.
One of the largest conference or probably the largest conference on taxation and taxation law in Europe took place last week on 4th – 6thof July (2013) in Rust, Austria under the theme “Trends and Players in Tax Policy”. The conference was organized by The Institute for Austrian and International Tax Law, Vienna, the WU Global Tax Policy Centerand the Research Council of Norway. Researchers and practitioners in the area of international and European tax law answered in advance to a series of questions regarding various aspects of tax policies in their country. Following guest speakers presented their overview on current changes in various fields of taxation: Prof. Dr. Dr. h.c. Michael Lang, Prof. Dr. Josef Schuch, Prof. Dr. Claus Staringer, Prof. Dr. Pasquale Pistone and Prof. Dr. Alfred Storck, and Prof. Dr. Jeffrey Owens.
Prior to the conference, researchers and practitioners in the area of international and European legislation on taxes answered to a set of questions on the key areas in taxes (e.g. what are the drivers of changes since 2000 in your country; current trends in corporate income taxation or in environmental taxes; relationship between tax administrations and taxpayers; existent key policy priorities and future tendencies). Among other trends, “green taxes” is aimed to be a priority on worldwide policy agenda. The results of the country reports will be soon to be published in a joint collection.
Around 100 participants discussed and debate the crucial importance of tax policy in the global economy and good governance.
One of the key trends is that countries are moving towards a simplification of their fiscal policy rules. This has the potential to improve the relationship between tax administrations and taxpayers, and (in an increasingly globalized labour market) could usher in more fruitful cooperation among tax authorities.
These two aspects are critical because of the mounting burdens facing individuals in many countries. For example, workers now face increases in personal taxation in France, Germany, Greece, UK and USA; the abolition or reduction of personal deductions; discussions or shifts from no taxation to taxation of the retirement income in Germany, Colombia and Chile; and a shift from progressive to flat rates in Hungary, Kazakhstan and Romania.
Clearly, not just individuals but also businesses move country in search of lower taxes and greater profits. This can be mutually beneficial in the short-term, but in the long-term may create problems that spill over borders in different ways. The movement of large corporations has created economic shockwaves, including what some observers see as the rising “global tax chaos”. The job of tax experts therefore is to identify regulatory gaps – covering both individuals and large businesses – and present policy makers with evidence-based solutions.
One current anomaly in the EU is that there is still no agreed definition for tax purposes of a cross-border worker. Additionally, while social security benefits are coordinated under EC Regulation 883/2004, there is no tax regulation on income among more than two countries. Double tax agreements and national laws are the main policy instruments that determine the tax status of cross-border workers; yet these vary considerably from country to country and fail to cover all eventualities. In some cases, double tax agreements do not include any provisions on cross-border workers, relying on the main principle of the agreement by which the individuals are not confronted with the situation of being taxed twice.
Equality is a further problem. Mobility for work across EU (and other) borders creates both vertical and horizontal inequalities among domestic and mobile earners. Mobility deductions, child credits, and other tax policy instruments play a significant role in supporting welfare (Burlacu & O’Donoghue, 2012) and in balancing incomes. However, gaps remain that require more research, more ‘joined-up thinking’, and more effective policies.* Published on the blog of UNU-MERIT and Maastricht Graduate School of Governance: http://blog.merit.unu.edu/taxing-times-for-cross-border-workers/