Tax Contribution Of East European Migrants


Economics, European Union

In a Today Programme interview on 30 April about our paper published that day (see Briefing Paper 1.38), Mr Portes did not challenge our findings that low paid migrants pay little or no net direct tax.   However, he suggested that we had overlooked the effect of other taxes paid by the low-paid.  He made the particular point that working age households in the lowest fifth of the income distribution pay about £30 a week in direct taxes and about £80 a week in indirect taxes.

 

However Mr Portes quite overlooks the extent to which benefits make up the income of these households. In fact, he will be well aware that the most recent government survey of The Effects of Taxes and Benefits on Household Income http://www.ons.gov.uk/ons/dcp171778_317365.pdf shows that the lowest fifth receive nearly as much in cash benefits as they do in total earnings, and that the cash benefits – amounting to £130 a week – are greater than all of the direct and indirect taxes paid put together (p.15),

 

To say that low-earning migrants are contributing through indirect taxes when the money they are spending is, in such a substantial part, what they are receiving from the state in benefits is clearly absurd, and yet another attempt to avoid serious discussion of the true cost of massive levels of immigration, especially in respect of the low paid.

 

The cost to the UK of migration is of course more than just the amount by which cash benefits exceed taxes paid. The widely-quoted study by [CReAM] of the fiscal effect of migration, balancing all taxes against government expenditures found an overall cost for all migrants between 1995 and 2011 of nearly £100bn.

 

Even though this cost is already very high, MigrationWatch noted that, among other questionable assumptions, CReAM had not taken any account of income levels in estimating the cost of government spending on tax credits and housing benefit paid. Our more detailed examination of household composition and income distribution among Eastern European employees working in the UK is clear evidence that this was simply wrong, and further undermines their claim of more positive contributions from recent EEA migrants.

 

As for the benefit of Eastern European migrants in terms of GDP per head, the NIESR (which Mr Portes now directs) found in a report published in 2011 that “The long-run impact on GDP per capita is expected to be negligible in the EU-15, but may be slightly positive, depending on the productive capacity of inward migrants.”

 

 

 

 

1st May 2014

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