Many East Europeans work hard but how many pay tax?

April 30, 2014

About 150,000 pay only £1 a week net tax

A new study out today reveals some of the ‘hidden’ costs to the UK taxpayer of the unprecedented wave of low paid Eastern European immigration in the past decade and how they are being ‘subsidised’ by the UK taxpayer.

The research from think tank Migration Watch compares the direct taxes and National Insurance contributions they pay with the social benefits, such as tax credits and housing benefit, they receive.

People who work at the minimum wage make virtually no net contribution and, if in a couple, they can receive significantly more in tax credits and other benefits than they pay in tax; this can be the case even at higher income levels

An analysis of official figures shows that about 150,000 employees pay into the Exchequer about £1 a week; some on shorter hours pay nothing at all but still receive benefits. If they have a partner they receive a net benefit of £88 a week. If they also have two children they receive £295 a week. A two-earner couple on the minimum wage would pay in £28 but, if they had two children, they could cost £380 a week.

These calculations do not include indirect taxes such as VAT; nor do they include additional burdens on public services such as health, education and social services.

The tax position of each worker depends, of course, both on his salary and on his family situation but, given that half of East European migrants are earning no more than £300 a week, a significant number are unlikely to be making any net contribution to the Treasury.

There are also major costs in later life, for pensions and health, to which the low-paid will make no significant contribution. These could amount to £120,000 for a single pensioner and £160,000 for a couple. It follows that attempts to justify low-paid immigration on the basis of taxes paid must fail because they ignore not only the tax credit system but also future commitments.

‘This analysis shows quite simply that the taxpayer is subsidising their wages; no wonder then that employers are in favour of them and that so many people find the UK such an attractive destination,’ said Sir Andrew Green, Migration Watch chairman. ‘We constantly hear that immigrants work hard and pay their taxes. There is no doubt that many of these people do work hard but it is a fact that those on the minimum wage pay virtually no direct taxes, and if in a couple, they can receive significant sums in tax credits and other benefits. Recent claims that EU migrants make a “very sizeable” contribution to the Exchequer have simply not taken into account that the low incomes of so many mean that they receive much more in means-tested benefits than they pay in tax.

‘To have granted the right to full and immediate access to our welfare state to workers from the poorer countries of the EU which have a total population of 100 million people was another of the “spectacular mistakes” made by the last Government. The EU Commission are now insisting that it be implemented in full but the reality is that this must be renegotiated if there is to be any chance of getting immigration down to acceptable levels as the public quite rightly demand,’ he said.

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