By Christian Dustmann and Tommaso Frattini
Centre for Research and Analysis of Migration (CReAM)
MW has extended our analysis of the fiscal impact of
immigration to the UK (Dustmann and Frattini 2014) to fiscal year 2014, a year
for which the data were not available when we wrote our paper. However,
while they claim to replicate our analysis in most points, they only consider
that specific year, rather than computing the cumulative fiscal contributions
of all immigrants who arrived since 2000, as we did.
It should be noted that the idea of our paper was to compute
the contribution of EEA immigrants (A10 and “old Europe”) for those who entered
the country after 2000, and up until the end of the data window (which was 2011
for our paper). We believe that this calculation answers the key policy question,
which is “What is the net fiscal contribution of immigrants who arrived in the
UK since year 2000 up until today”, or “What is the net fiscal contribution of
immigrants who arrived in the UK since year 2000 up until today, relative to
natives”. In that way, we capture entire entry cohorts of immigrants up until
the present day.
What MW did was just choosing one year only – 2014. This
tells us the rate at which the cumulated contribution of immigrants is growing
in 2014 only. This is certainly a less interesting question than the
question we pose. For that particular year, they show that EEA immigrants who arrived
since 2000 make a roughly neutral net contribution. It
would remain true that the cumulative contribution over the last 15 years
must be positive. It should also be noted that the net fiscal
contribution of EEA immigrants even for that one year is still higher than that
of natives. In fact, MW estimates that in 2014 natives contribute to the
Exchequer about 85% of what they cost, thus making a substantial negative fiscal contribution.
A couple of additional points are worth noting.
1)
The central scenario analysed by MW is one where
recent immigrants are assumed to make no contribution to corporate taxes.
However, as we discuss in our study, the allocation of corporate taxes and
business rates raises complicated questions of incidence. The fact that businesses write the cheques
does not mean that the burden do not fall ultimately on consumers or workers. In
fact, there is a literature in economics that suggests that it is workers and
consumers who ultimately pay the major share of such taxes, if not all. Our
analysis was taking no stance on this debate, apportioning capital and corporate tax payments, net of
the percentage likely to be paid by foreign shareholders, on a per capita basis
among the adult population. When MW adopts this assumption, which we believe is
more realistic and grounded in economic evidence, they find that recent EEA
immigrants have made an overall fiscal contribution of £1.5 million in 2014.
2)
MW emphasise in their study mostly their results
for the entire resident immigrant population in the UK in 2014. As we have made
repeatedly clear, in our paper and in other comments, this is a figure that is
extremely difficult to interpret, and it is not clear what question it answers.
It reports the contribution at one point in time of a very heterogeneous
population of immigrants, many of whom have entered several years or even
decades ago, and any contributions they may have made earlier is ignored. Moreover,
a substantial fraction of immigrants who arrived at some time in the past have
returned to their home countries by 2014, after possibly spending their most
productive years in the UK and contributing to the fiscal coffers. We believe
that this figure is therefore not very informative.
