The economy of undocumented migration: Taxation and access to welfare

European Journal of Migration and Law

Volumn 12, Issue 2, 2010, Pages 149-171

  Tjernberg, Mats ^a  

^a LUND UNIVERSITY   (Sweden)

Author keywords

informal economy; social benefits; Taxation; undocumented migrants

Indexed keywords

EID: 77956358540     PISSN: 1388364X     EISSN: 15718166     Source Type: Journal    
DOI: 10.1163/157181610X496858     Document Type: Article

References (89)

1. Denver Post, 3 January 2000.
2. See the contribution by Shannon Alexander in this issue, 12(2) European Journal of Migration and Law (2010) 215-240.
3. E.R. Rodriguez, 'International Migrants' Remittances in the Philippines', Canadian Economics Association (1996).
4. E.J. Taylor, 'The New Economics of Labour Migration and the Role of Remittances in the Migration Process', 1 International Migration, vol. 37, pp. 63-88.
5. R.H. Adams Jr, 'International Migration, Remittances and the Brain Drain: A Study of 24 Labor-Exporting Countries', World Bank Policy Research Working Paper No. 3069 (2003).
6. E.J. Taylor and P. Martin, 'Human Capital: Migration and Rural Population Change', in Handbook for Agricultural Economics (New York: Elsevier Science, 2001).
7. See A. Simms, 'The New Serfs', New Statesman, 16 February 2004, from which the following examples of accidents are drawn.
8. F. Schneider, 'The Size of the Shadow Economies of 145 Countries all over the World: First Results over the Period 1999 to 2003', IZA Discussion Paper No. 1431 (2004).
9. See S. Sassen, Globalization and Its Discontents (New York, 1998), p. 153.
10. P. Harding and R. Jenkins, The Myth of the Hidden Economy (Milton Keynes and Philadelphia: Open University Press, 1989).
11. See also M. Leonard, Invisible Work, Invisible Workers-The Informal Economy in Europe and the US (Houndmills and London: Macmillan Press 1998).
12. Z. Slavnic, 'Political Economy of Informalization', European Societies 12 (1) (2010), pp. 1-21
13. D.W. Light, 'From migrant enclaves to mainstream: Reconceptualising informal economic behavior', Theory and Society 33 (2004), pp. 705-737
14. and M. Ram, P. Edwards and T. Jones, 'Staying underground: Informal work, small firms, and employment regulation in the United Kingdom', Work and Occupations 34(3) (2007), pp. 318-344.
15. F. Schneider has estimated the size of the Shadow Economies of 145 Countries. Not surprisingly, direct tax burdens have the biggest impact on the size of the shadow economy in the Scandinavian countries.
16. F. Schneider, supra note 6, p. 5.
17. Ibid., pp. 5-6.
18. F.J.F. Moreno suggests this as an option of "partial exit" that keeps economic activity and employment in the country, in; The regularisation of undocumented migrants as a mechanism for the "emerging" of the Spanish underground economy' Unidad de Políticas Comparadas (CSIC), Working Paper 05-06.
19. Ibid., supra note 13.
20. F.J.F. Moreno, citing D. Campbell, 'Searching for the hidden economy', Region Focus, Spring, Federal Reserve Bank of Richmond, Richmond, VA (2005).
21. W.A. Lewis, The Theory of Economic Growth (1955).
22. S. Sassen (1998) p. 153, C.C. Williams and J. Windebank, 'Refiguring the nature of undeclared work', European Societies 7(1) (2005), pp. 81-102. As Schneider's investigation of the shadow economy in 145 countries all over the world shows, it has reached a remarkably large size and is present to an important extent in all type of economies (developing, transition and developed). Schneider, supra note 6, pp. 42-43.
23. S. Sassen, Globalization and Its Discontents, p. 154 and Cities in a World Economy (1994).
24. See also M. Ram, P. Edwards and T. Jones, 'Staying underground: Informal work, small firms, and employment regulation in the United Kingdom', Work and Occupations 34(3) (2007), pp. 318-344
25. P. Renooy, 'Undeclared work: A new source of employment?', International Journal of Sociology and Social Policy 27(5/6) (2007) pp. 250-256.
26. S. Sassen (1998), p. 155.
27. Z. Slavnic, 'Political Economy of Informalization', European Societies 12 (1) (2010), pp. 1-21.
28. M. Castells and A. Portes (Eds.), World Underneath: "The Origins, Dynamics and Effects of the Informal Economy", in the Informal Economy, Studies in Advanced and Less Developed Countries (1989).
29. F. Schneider, p. 7.
30. C. Schierup, ' "Bloody Subcontracting" in the Network Society: Migration and Post-Fordist Restructuring across the European Union', in E. Berggren et al. (Eds.) Irregular Migration, Informal Labour and Community: A Challenge for Europe (Maastricht: Shaker Publishing (IMILCO) 2007).
31. Ibid,.
32. See again Z. Slavnic supra note 20. He argues that the role of the state has become problematic. Its fulfillment of the welfare commitments depends on continuous economic growth. Big capitalist enterprises more frequently demand from the state measures that basically result in limiting certain welfare commitments. "To manage such a situation, the state more frequently employs strategies that either are themselves more or less informal in character or force other economic actors to adopt informal strategies more often than before."
33. Commission Communication 262 (2009), p. 4.
34. Reported in 'RITA, rättvis ingång till arbete' (Fair Entrance to Work) (2008), pp. 7 and 32. One method to determine the number of undocumented immigrants is to study the numbers who have come forward in countries where the authorities have made it possible for undocumented immigrants to apply for permanent residence permits. One example is Spain, a country that in 2005 received 600,000 applications from foreigners who had work permits but no residence permits, a figure that corresponded to 25 per cent of the previously registered foreign-born population, T. Barbulo, 'Las solicitudes para regularizar a migrantes superan ya las 600.000', El Pais (6 May 2005)
35. In Italy, a similar campaign in 2002 led to the registration of 700,000 undocumented immigrants, C. Pinkerton, G. McLaughlan and J. Salt, Sizing the illegally resident population in the UK, Home Office Online Report 58/04, Migration Research Unit, University College London. According to the EU an estimated 600,000 legal immigrants and 350,000 to 500,000 illegal migrants, of whom many end up in the building sector, enter the 27-nation bloc each year. EU plans crackdown on employers of illegal migrants, http://www.reuters. com/article/latestCrisis/idUSL16132317.
36. See also M. Börjesson, A. Hjern and H. Swärd, 'Groups in the margins' (Chapter 9). International Journal of Social Welfare, vol. 16, iss. 1 (July 2007), pp. 227-228.
37. S. Castles and M.J. Miller, The Age of Migration - International Population Movements in the Modern World, 3rd edition, (Palgrave Macmillan, 2003), pp. 178-182.
38. COM (98) 219. The other three groups are: second and multiple jobholders, the unemployed and the economically inactive population. It is of course hard to find a common definition of undeclared work.
39. R.H. Bharat and M.S. Pasquale, 'The simple analytics of optimal growth with illegal migrants'. Journal of Economic Dynamics & Control 28 (2003), pp. 141-151.
40. B.R. Hazari and P.M. Sgro, supra, pp. 141-151.
41. H.M. Moy and C.K. Yip, 'The simple analytics of optimal growth with illegal migrants: A clarification', Journal of Economic Dynamics & Control, vol. 30, iss. 12 (2006), pp. 2469-2475.
42. D. Coleman and R. Rowthorn, 'The Economic Effects of Immigration into the United Kingdom', Population and Development Review, vol. 30, no. 4. (Dec. 2004), pp. 579-624;
43. A. Venturini, 'Do immigrants working illegally reduce the natives' legal employment? Evidence from Italy', Journal of Population Economics 12 (1999), pp. 135-154.
44. G. Borjas, Increasing the supply of labor through immigration: Measuring the impact on native-born workers, Backgrounder, May, (Washington DC: Center for Immigration Studies 2004).
45. J. Ferri, A. Gómez-Plana and J.A. Martín-Montaner, 'Illegal immigration booms and welfare in the host country', European Journal of Population vol. 22, iss. 4 (2006), pp. 353-370.
46. W. Cornelius, P.L. Martin and J.F. Hollifield, 'Introduction: The Ambivalent Quest for Immigration Control', in: Wayne Cornelius et al. (Eds.): Controlling Immigration: A Global Perspective, (Stanford, CA: Stanford University Press, 1994), pp. 3-42.
47. C. Boswell and T. Straubhaar, 'The Illegal Employment of Foreigners in Europe', Intereconomics (Jan/ Feb 2004) 39, 1; ABI/INFORM Global, p. 6.
48. William Beveridge, civil servant in the Britain government, in 1942 presented a report which has had a major influence in other countries by setting a much more ambitious agenda for social security than had generally been accepted before. One major idea was that social security should be stretched to cover everyone. Social security was to be achieved by co-operation between the State and the individual. The State, by establishing a national minimum, should still 'leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family'. See B. Abel-Smith, 'The Beveridge Report: Its origins and outcomes', 1-2/92 International Social Security Review vol. 45.
49. J. Rawls, A Theory of Justice (Harvard University Press 1971).
50. T. Erhag, Fri rörlighet och finansiering av social trygghet (Santérus, Stockholm 2002) p. 84.
51. Examples in research that connect the two areas is Å. Gunnarsson, Fördelningen av familjens skatter och sociala förmåner (Uppsala: Iustus 2003). Gunnarsson proves the absence of a coherent legal system regarding granting basic social security to families with children. One of her explanations is that legal reforms regarding taxes and social securities are too often not coordinated. In Samband i socialförsäkringen (Uppsala: Iustus 2003), R. Mannelqvist has studied the connection between benefits and contributions in social insurance, and found the coordination weak. In Fri rörlighet och finansiering av social trygghet (Stockholm: Santérus 2002), T. Erhag showed that withdrawal of social contributions and income taxes are made according to different principles.
52. See Å. Gunnarsson, supra, p. 23 and R. Mannelqvist, supra, p. 30.
53. See J. Palme, 'EU, skatterna och socialförsäkringarna', p. 70, in S. Gustavsson, L. Oxelhielm and N. Wahl (Eds.), EU, skatterna och välfärden, Europaperspektiv (2004).
54. An example of Swedish citizenship entitling one to rights is that the municipality has a social responsibility for Swedish citizens not living in Sweden. The increasing group of Swedish citizens permanently living abroad can under certain circumstances still count on Swedish help. It could be evacuation during different crises situations and Councils can be obliged to provide somewhere to stay after arrival in Sweden. Even without a Swedish decision on evacuation, it is possible that persons with Swedish citizenship can go back to Sweden on their own in case of outbreak of war or epidemics or natural disasters for example and have right to aid and assistance. A recently appointed investigation, dir. 2008:13, will analyze and consider the need for changing the rules about municipal responsibilities for non-resident citizens.
55. For a historical description, see for example, H. Gustafsson, Rättens polyvalens. En rättsvetenskaplig studie av sociala rättigheter och rättssäkerhet (Lund: Studies in Sociology of Law 2002).
56. Citizenship is here used according to Marshall's division between the legal and political status of membership; including civil, political and social rights. Compare Y. Soysal, Postnational Citizenship: Reconfiguring the Familiar Terrain (Syracuse, New York: Campbell Public Affairs Institute, 2004).
57. S. Khosravi, 'Territorialiserad mänsklighet: irreguljära immigranter och det nakna livet. Om välfärdens gränser och det villkorade medborgarskapet', in: P. de los Reyes (ed.), (SOU 2006:37), p. 287.
58. K. Wicksell, Om en ny princip för rättvis beskattning (Ratio, 1987).
59. H. Ault, Comparative income taxation. A structural analysis (The Hague: Kluwer Law International 1999), p. 367.
60. Under some circumstances, income from employment could also lead to taxability for non domestic persons based on the source of the income, SINK (the regulation regarding tax liability for non domestic persons).
61. Dnr. 131 656725-05/111.
62. Another issue is that the person could have an essential connection and on that ground be fully taxable.
63. See originally prop. 1927:102, bil. 3 p. 46 f., thereafter prop. 2004/05:19 p. 30 and Skatteverkets handledning för taxering (The Tax Agency's guidance for taxation) p. 35. Dahlman and Fredborg state that it is conceivable that the person must be staying at a certain geographic place and has a connection to that specific place. R. Dahlman and L. Fredborg, Internationell beskattning, 2:3.
64. In a case reported in Regeringsrättens Årsbok 1947 note 455, a British citizen was taxed. He came to Sweden for holiday in 1939 and stayed in the country for several years due to the War. See also SOU 2003:12 p. 124.
65. This is also the case in the United States according to F.J. Lipman; 'The Taxation of Undocumented Immigrants: Separate, Unequal, and Without Representation', Harvard Latino Tax Review, vol. 9 (2006). According to the article, taxes paid by undocumented migrant (for tax reasons categorized as "resident aliens" amount to more than one billion dollar. The foremost reason for this category to declare taxable income is probably that this is demanded in order to make naturalization possible.
66. For this the person must have a ten digit personal number. In order to get this the person must be registered in Sweden but it's not unusual that persons borrow personal numbers from others, 'RITA, rättvis ingång till arbete' (2007) (Fair Entrance to Work), reporting on undocumented migrants working in the cleaning business.
67. According to directive 2009/52/EC, providing for minimum standards on sanctions and measures against employers of illegally staying third-country nationals, an employer should in any event be required to pay to the third-country nationals any outstanding remuneration for the work which they have undertaken and any outstanding taxes and social security contributions. See the contribution by Inghammar in this issue 12(2) European Journal of Migration and Law 193-214.
68. See http://epp.eurostat.ec.europa.eu/cache/ITY-OFFPUB/KS-SF-09-040/EN/KS- SF-09-040-EN.PDF (visited 2 October 2009).
69. T. Erhag, supra note 41, p. 21.
70. Ibid., p. 26.
71. See supra note 30.
72. U. Schneider and A. Österle, 'Fiscal Competition and Activist Social Policy', in K. Andersson, E. Eberhartinger and L. Oxelhielm (Eds.), National Tax Policy in Europe. To Be or Not to Be? (Springer, 2007), p. 70.
73. U. Schneider and A. Österle, supra, pp. 70-71.
74. Named for the Prussian Chancellor Otto von Bismarck, who invented the welfare state as part of the unification of Germany in the 19th century. In such a system an insurance system is used, usually financed jointly by employers and employees through payroll deduction. Unlike the US insurance industry, though, Bismarck-type health insurance plans have to cover everybody, and they don't make a profit. Doctors and hospitals tend to be private in Bismarck countries; Japan has more private hospitals than the U.S. Although this is a multi-payer model - Germany has about 240 different funds - tight regulation gives government much of the cost-control clout that the single-payer Beveridge model provides.
75. SOU 2007:43. Legislation has not been decided at the time of writing.
76. See Shannon Alexander's contribution to this issue for a further description how Swedish legislation affects the right to health care for undocumented migrants (pp. 215-240).
77. The preparatory works, 1993/94:94 p. 47.
78. Such a decision has been taken by the regional authorities in Skåne, http://www. skane.se/upload/ Webbplatser/Skaneportalen-extern/ PolitikPaverkan/Sammantraden/Regionfullmaktige/Foredragningslista/ dokument/RF-080422-6.pdf. It has been followed by another decision concerning emergency dental service for illegal refugees. In order to be able to patients, the National Dental Service will use fictitious personal numbers for refugees without asylum rights.
79. Socialstyrelsen (The National Social Welfare Board), Social Report 2006, p. 342.
80. For more about these questions see H. Swärd, M. Börjesson and A. Hjern, 'Groups "in the margins" ', (Chapter 9), International Journal of Social Welfare 16(1) (2007) 219-232.
81. In Sweden, it is not illegal to help persons, wanted by the Police and liable to be expelled from Sweden, as long as it is done without economic profit.
82. 'Hade inte råd med vård - dog efter förlossning' (Could not afford health care - died after delivering a baby), Skånska Dagbladet, 26 March 2008, http://www.skanskan.se/article/20080326/NYHETER/ 269636080/1057
83. In order to consolidate the existing framework, and to clarify those parts where interpretation problems existed, the European Parliament and the Council of Ministers have adopted a new regulation, 883/2004.
84. The extension to third country citizens does not cover Denmark, Iceland, Liechtenstein, Norway or Switzerland. There is however already a convention which guarantees health care in any Nordic country for citizens of other Nordic countries.
85. Reported in Regeringsrättens Årsbok 1995, ref. 70.
86. M. Börjesson, A. Hjern and H. Swärd, supra note 70, p. 229. Socialstyrelsen, Hälso- och sjukvård för asylsökande och flyktingar [Health and Medical Services for Asylum-Seekers and Refugees]. Allmänna råd från Socialstyrelsen [General advice from the National Board of Health and Welfare] (Stockholm, 1995:49).
87. H. Ascher, A. Björkman, G. Bodegård, L.H. Gustafsson, A. Hjern, O. Jeppsson, I. Karlsson, L. Kjellström, T. Lindberg and P. Pehrson, 'Hälso- och sjukvård för asylsökande: Nytt lagförslag strider mot mänskliga rättigheter och läkaretiska regler' [Health and medical care for asylum seekers: new government bill in conflict with human rights and medical ethics], Läkartidningen 102(38) (2005), pp. 2676-2679.
88. Picum, 2005. From a questionnaire of 102 undocumented immigrants, undertaken by the Swedish section of Doctors without Borders, 62 per cent reported that neither they nor their partners were able to afford a home and therefore had to rely on friends, relatives, voluntary organisations or members of religious communities for their accommodation, 'Gömda i Sverige. Utestängda från hälso- och sjukvård' [Hiding in Sweden. Barred from health and medical care]. Resultat från en studie av Läkare Utan Gränser' [Results of a study by the Swedish section of Doctors Without Borders] (2005).
89. Picum, Book of solidarity. Providing assistance to undocumented migrants in Sweden, Denmark and Austria, vol. 03 (Brussels: Platform for International Cooperation on Undocumented Migrants 2005).