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Migrants, Taxes, and Fiscal Inclusion

Published 26 September 2022 / By Nicolette Makovicky and Dora-Olivia Vicol

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Introduction

Tax and migration are fundamentally interlinked in British society. In the post-Brexit context, a record of tax contributions is the simplest way for EEA citizens and their family members to demonstrate residence, and secure settled status in the United Kingdom. Paying tax and national insurance contributions also gives migrants access to benefits and rights to a pension. Tax also mediates the relationship between migrants and the host society: both supporters and critics of migration stake their arguments on migrants’ net tax contribution. In migration debates, the fiscal balance is often used to distinguish between ‘good migrants’, welcomed for their ability to contribute fiscally, and those castigated for ‘scrounging’. Indeed, migrants themselves use their taxpayer status to challenge stereotypes, and assert their right to be included in British society.

Despite the practical and cultural importance of tax, however, anecdotal evidence suggests that migrants can struggle to become taxpayers and to affirm their taxpayer rights. The Taxing Migrants project brought together the expertise of front-line advisors from the Work Rights Centre with scholars of migration and tax at the University of Oxford (OSGA/COMPAS) to understand how well migrants understand and navigate the UK tax system. What we found was that many migrants face what we call a fiscal inclusion challenge: the challenge of paying tax, and accessing the state protections that come with taxpayer status.

For many new migrants, the UK tax system is a complex infrastructure which needs several layers of literal, and cultural, translation. A significant part of the fiscal inclusion challenge is constituted by the UK government’s move towards digital services since 2011. This ‘digital by default’ approach means that migrants must pay their taxes, claim benefits and apply for housing online. EU nationals must prove their right to work, rent, and study in the UK digitally, by providing their employers, landlords, and educational institutions with a share code, rather than a physical proof of status. Migrants who lack language proficiency and IT literacy struggle to navigate the jargon and digital nature of this system. While they may speak conversational English and use social media (such as Facebook and WhatsApp) on their smartphone, they find the requirements and formats of government websites intimidating and unintelligible.

Migrants’ ability to navigate the fiscal infrastructure in the UK is also shaped by the fiscal system they had grown accustomed to in countries of origin. Certain countries in Central and Eastern Europe do not currently have an adequate and workable framework for taxing certain kinds of economic activity, such as small-scale agricultural work, personal services (such as cleaning or hairdressing), or casual manual labour. Migrants are often unaware that undertaking such economic activity in the UK requires registration as self-employed, or are intimidated by the process and requirements. They are often unaware of the fact that formal self-employment comes with a series of quotidian bureaucratic duties: keeping a record of earnings and expenditure through invoices and receipts, filing tax returns at the end of the year, and regularly monitoring communication from HMRC.

Those migrants who lack the required bureaucratic literacy often rely on information from friends, social media groups, or unregulated, for-profit high-street consultants. From established firms employing qualified accountants, to sole-trading individuals operating as self-styled advisors, these intermediaries charge fees for services such as applying for a National Insurance Number, benefits, or fulfilling routine tax-return obligations. The number of such informal tax intermediaries has grown in response to the acute demand for help with fiscal inclusion. However they collect a significant amount of personal data from migrants and retain access to, and often control over, their accounts. This leaves migrants open to identity theft, as well as other types of fraud.

To prevent vulnerable migrants from becoming dependent upon for-profit tax advisers, the fiscal inclusion challenge merits urgent attention from academics and policy makers alike. We need more primary research with migrants to understand the main barriers to navigating fiscal structures, and how to mitigate them. We also need better support from HMRC and local authorities to increase the capacity of third sector organizations and registered advisers to provide timely, quality advice.

Download the full report: Migrants and Taxes: Challenges of fiscal inclusion in the digital age

Read more about The Taxing Migrants Project

Authors:

  • Nicolette Makovicky is Programme Director and Departmental Lecturer at Russian and East European Studies at the University of Oxford. She has published on themes including labour, ethics, informal economy, entrepreneurialism in Slovakia and Poland.
  • Dora- Olivia Vicol is an anthropologist with a long-term interest in work, mobility, and migration from Central and Eastern Europe (CEE). In 2016 she co-founded the Work Rights Centre, a charity dedicated to employment justice. At the Work Rights Centre, Olivia leads on research, policy, and strategy.
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