# **1. INTRODUCTION**

In recent years, the rise in remittance flows from migrant workers to their home countries has been one of the most important sources of resource transfers for developing countries. However, despite the evident support for improving living conditions in poorer countries, international migration continues to be a contentious public policy issue in richer countries. Among the various reasons why this is so is the negative perception that migrants impose a disproportionately large fiscal burden on receiving countries,<sup>1</sup> because they consume a relatively larger share of social benefits and services (because they are more likely to be unemployed or have larger families, or strive hard to claim the maximum possible benefits that they possibly can, etc.) and make relatively small contributions to tax revenues (e.g. because of higher tax evasion, greater tendency to work in the informal economy, etc.) than the country’s non-migrant population. The main objective of this paper is to ascertain whether evidence derived from household survey data on tax payments and benefits consumption of migrant in various countries of the European Union support this perception.

The paper is organized as follows: Section 2 provides a brief description of the 2006 European Union Survey of Income and Living Conditions (EU-SILC), the primary data set used in the paper, including definitions of key variables used in the analysis as well as a summary of the proxy criteria used to identify the various EU “migrant population” sub-groups. In the remainder of the paper, the analysis focuses on five main sub-groups of interest for the main individual EU countries and other country sub-groups (in particular, the EU13 and EU4)<sup>2</sup> : (i) the native-born population, (ii) citizens born in other EU countries, (iii) citizens born outside the EU, (iv) non-citizens that are citizens of other EU countries, and, finally, (v) non-citizens that are citizens of other non-EU countries. Section 3 provides a profile of these five population sub-groups, focusing in particular on how the relative sizes of these groups and other key characteristics (e.g. demographic composition, educational background and nature of employment, etc.) vary across the main EU countries and other country sub-groups of interest noted above.

Section 4 analyzes the contributions of migrants to the national tax and benefits systems of the various EU countries where they currently live, and in particular shows that in EU13 countries as a group, there is no evidence to support the contention that migrant workers contribute much less in taxes than the native-born population, or consume significantly higher benefits. On the contrary, our calculations suggest that migrants make significant net positive contributions to the national tax and benefits systems of EU13 countries. Since the analysis also reveals considerable heterogeneity across countries, Section 5 discusses the differing experiences of Austria, Belgium, Spain, Ireland, Sweden, and the United Kingdom with regard to the differing net contributions of the various migrant subgroups. This section also concludes by summarizing the key findings of the paper, as well as discussing the main factors that help explain the differing situation across individual EU countries. In particular, the section shows how differing receipts of retirement benefits is the main reason that explains why migrants consume significantly lower benefits compared to the native-born population.

> 1 See, for example, Zsolt Gal: The Paradox of European Immigration—Limited Access to the Labour Markets, Open Doors to the Swedish Table of Welfare Systems. National Bank of Poland’s Journal on Economics and Finance: “Migration, Labour Market and Economic Growth in Europe after Enlargement”. Warsaw 8-9 December, 2008.

> 2 The EU13 group comprises Austria, Belgium, Denmark, Spain, Finland, France, Greece, Ireland, Italy, Netherlands, Portugal, Sweden, and the United Kingdom, while the EU4 group comprises Poland, Czech Republic, Hungary, and Slovakia. The rationale for focusing on these specific country groups is provided later in the paper.

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