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Cross-Border Mobility of Individuals and the Lack of Fiscal Policy Coordination Among Jurisdictions (Even) After the BEPS Project
Abstract
Cross-border mobility of individuals has serious implications for states, irrespective of whether they are the emigration country or the immigration country and use citizenship or residence as the relevant criterion to exert their fiscal jurisdiction over the worldwide income of an individual taxpayer. This article illustrates in detail the various tax policies that a country can adopt to deal with cross-border mobility of individuals. The article first contrasts citizenship-based taxation with citizenship-by-investment programmes. Then, defensive strategies adopted by the emigration country against outward mobility of resident individuals are considered in parallel with preferential tax regimes for inward expatriates enacted by the immigration country. Next, the limited role – even after the Base Erosion and Profit Splitting (BEPS) Project – of tax treaties and other international tax instruments to curb competing fiscal policies of states is discussed. Finally, as a possible remedy to such clash of policies, the author tentatively proposes the abandonment of the long-established connecting factors of citizenship and residence and, in their place, the adoption of a new jurisdictional nexus based on the actual physical presence of an individual in the territory of a state, determined with the help of geo-localization technologies, which would lead to a proportional allocation of taxing rights among the countries interested in individual mobility.
... A genuine connection of an individual with a state, close to the OECD/G20 BEPS "nexus approach" and in light of the 21 st century membership and relationship principles, seems in fact to be better reflected by a connecting factor showing a "true" social allegiance between an individual and a state, which, in a world of increased individual mobility, would perhaps be represented by a person being actually physically present in the territory of a country. 192 In light of such principles, taxation based on citizenship as a single or supplementary nexus should be avoided. Further, disentangling citizenship from tax matters would consent a country to pursue its own legitimate policies about citizenship acquisition and loss, without at the same attaching to them tax considerations capable of distorting individual preferences. ...
Since the times of the ancient Greeks and Romans, citizenship has traditionally defined membership of an individual to a political community. Despite being at the foundation of modern national states and a central pillar of a supranational institution like the European Union, the importance of citizenship has progressively declined as a result of globalization and increased cross-border mobility. Even in the field of taxation, citizenship, being an expression of a political allegiance between an individual and a state, has almost been abandoned as a connecting factor for a state to establish its jurisdiction to tax.
This paper, however, argues that such perception is largely misplaced. Far from being a relic of the past, citizenship still maintains its relevance in today’s tax field. By recalling four different tax-related “tales”, the paper shows how citizenship can serve, at times, either to extend or restrict a state’s taxing claims over an individual’s income. The ensuing analysis evidences that all uses of citizenship for tax purposes are instrumental and do not reflect the effective participation of an individual into a political community. After an evaluation of alternative policies to bring the usage of citizenship in line with the OECD/G20 BEPS nexus approach as well as with the 21st century membership and relationship principles, the paper concludes that citizenship as a connecting factor in tax matters should be altogether abandoned.
This article examines the complex relationship between investment visas and tax residency within the context of increasing global mobility. As cross-border investments and the movement of high-net-worth individuals continue to grow, the process of determining tax residency has become more complicated and nuanced. The study investigates how countries use investment visa programs as strategic tools to attract capital, often by offering favorable tax regimes that blur traditional tax jurisdictional boundaries. While these programs are effective in drawing economic resources, they also raise ethical concerns and create opportunities for tax avoidance, thereby challenging the integrity of global tax systems. By analyzing current legal frameworks, the article seeks to clarify the complexities of tax residency in today’s world. It addresses the challenges arising from the intersection of investment-driven immigration and tax law, emphasizing the difficulties in establishing clear tax obligations and residency status when individuals and their assets are dispersed across multiple jurisdictions. The ethical issues associated with these investment programs are also scrutinized, particularly the commercialization of citizenship and the risks of facilitating tax evasion. The article calls for a reevaluation of existing tax residency criteria, advocating for updates that reflect the realities of global mobility while ensuring legal certainty and fairness. Ultimately, the conclusions highlight the need for a more cohesive international framework to address the challenges and opportunities arising from the dynamic interplay between investment visas and tax residency.
Desde finales de 2020 se viene discutiendo, sobre todo en la prensa, el fenómeno de la huida (fiscal) de youtubers al Principado de Andorra. El trabajo analiza de forma pormenorizada estos traslados de residencia desde el punto de vista de todas las reglas del sistema fiscal español potencialmente aplicables concluyendo que la arquitectura del modelo vigente impide, en la mayor parte de los casos, poner freno a estos traslados.
In the face of population ageing and demographic decline, nowadays all countries compete for an increasingly valuable asset: human capital. Indeed, the drain of human capital from one country to another concerns not only highly-skilled individuals seeking job opportunities abroad, but also pensioners relocating to sunnier and more tax-friendly jurisdictions. Absent global action, the risk of uncoordinated and unilateral measures taken by countries to increase and protect their own tax base, with adverse effects both from the inter-nation and the intranation equity perspective, is very concrete. So far, however, neither the OECD nor the European Union have developed specific policies or measures in the domain of individual taxation. Arguing that scope of reform exists also in this field, the article explores various policies and measures as a blueprint for individual taxation reform, with the double aim to curb tax competition among countries and fix the crumbling social contract.
In the face of population ageing and demographic decline, all countries nowadays compete for an increasingly valuable asset: human capital. Indeed, the drain of human capital from one country to another concerns not only highly-skilled individuals seeking job opportunities abroad, but also pensioners relocating to sunnier and more tax-friendly jurisdictions. Absent a global action, the risk of uncoordinated and unilateral measures taken by countries to protect their own tax base is very much concrete, especially in the European Union. Neither the proposal for a Global anti-Base Erosion (GloBE) unveiled by the OECD in 2019 nor the BEPS project itself however contain any measure for individual taxation. Arguing that scope for reform exists also in this field, the paper explores various policies and measures which might underpin a GloBE proposal for individual taxation, with the double aim to curb tax competition among countries and fix a crumbling social contract.
For a discussion of 'fractional residence taxation', see H. Niesten, Personal and Family Tax Benefits in the EU Internal Market: From Schumacker to Fractional Tax Treatment
For a discussion of 'fractional residence taxation', see H. Niesten, Personal and Family Tax Benefits in the EU Internal Market: From Schumacker to Fractional Tax Treatment, 55
(3) Common Mkt. L. Rev. 819 (2018);
Source versus Residence: An EU Perspective
- M Mössner
M. Mössner, Source versus Residence: An EU Perspective, 60(12) Bull. Int'l Tax'n (2006);
Fractional Taxation of Multi-State Income of EU Resident Individuals: A Proposal
- K Van Raad
K. van Raad, Fractional Taxation of Multi-State
Income of EU Resident Individuals: A Proposal, in Liber Amicorum Sven-Olof Lodin 211 (K. Andersson, P. Melz & C. Silfverberg eds, Wolters Kluwer 2001);
Progressive Taxation of Non-Residents and Intra-EC Allocation of Personal Tax Allowances: Why Schumacker, Asscher, Gilly and Gschwind Do Not Suffice
- P J Wattel
P. J. Wattel, Progressive Taxation of Non-Residents
and Intra-EC Allocation of Personal Tax Allowances: Why Schumacker, Asscher, Gilly and Gschwind Do Not Suffice, 40(6) Eur. Tax'n (2000).
Case C-391/97, Gschwind, ECLI:EU:C:1999:409; NL: ECJ
DE: ECJ 14 Feb. 1995, Case C-279/93, Schumacker, ECLI:EU:C:1995:31. Other landmark decisions rendered by the ECJ in context of the development of the Schumacker
doctrine are: NL: ECJ, 11 Aug. 1995, Case C-80/94, Wielockx, ECLI:EU:C:1995:271; DE: ECJ, 14 Sept. 1999, Case C-391/97, Gschwind, ECLI:EU:C:1999:409; NL: ECJ,
12 Dec. 2002, Case C-385/00, De Groot, ECLI:EU:C:2002:750; SE: ECJ, 1 July 2003, Case C-169/03, Wallentin, ECLI:EU:C:2004:403; NL: ECJ, 16 Oct. 2008, Case C527/06, Renneberg, ECLI:EU:C:2008:566; DE: ECJ, 28 Feb. 2013, Case C-425/11, Ettwein, ECLI:EU:C:2013:121; BE: ECJ, 12 Dec. 2013, Case C-303/12, Imfeld and Garcet,
ECLI:EU:C:2013:822; NL: ECJ, 18 June 2015, Case C-9/14, Kieback, ECLI:EU:C:2015:406; NL: ECJ, 9 Feb. 2017, Case C-283/15, X v. Staatssecretaris van Financiën, ECLI:
EU:C:2017:102. Besides the ECJ case law, the doctrine has also found a formulation in the (non-binding) European Commission, Commission Recommendation 94/79/EC of 21
on the Taxation of Certain Items of Income Received by Non-Residents in a Member State Other than That in Which They Are Resident
- Dec
Dec. 1993 on the Taxation of Certain Items of Income Received by Non-Residents in a Member State Other than That in Which They Are Resident, OJ L 39/22, (10 Feb. 1994).
For a comment, see H. Niesten, Case X v. Staatssecretaris van Financiën: Fractional Allocation of Personal and Family Tax Benefits for EU Resident Individuals with Multi-State Income
- X V Staatssecretaris Van Financiën
X v. Staatssecretaris van Financiën (C-283/15), para. 49. For a comment, see H. Niesten, Case X v. Staatssecretaris van Financiën: Fractional Allocation of Personal and Family Tax
Benefits for EU Resident Individuals with Multi-State Income, 26(4) EC Tax Rev. 201 (2017).
Proposal for a Council Directive on the Common System of a
European Commission, Proposal for a Council Directive on the Common System of a Digital Services Tax on Revenues resulting from the Provision of Certain Digital Services, COM(2018)
148 final (21 Mar. 2018), at 12.
Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 Apr. 2016 on the Protection of Natural Persons with regard to the Processing of Personal Data and on the Free Movement of Such Data, and repealing Directive 95/46/EC (General Data Protection Regulation)
The European Parliament and the Council of the European Union, Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 Apr. 2016 on the Protection of
Natural Persons with regard to the Processing of Personal Data and on the Free Movement of Such Data, and repealing Directive 95/46/EC (General Data Protection Regulation), OJ L119/
1 (4 May 2016).
For an overview of geo-fencing, see A. Küpper, U. Bareth & B. Freese, Geo-Fencing and Background Tracking: The Next Features in LBSs
For an overview of geo-fencing, see A. Küpper, U. Bareth & B. Freese, Geo-Fencing and Background Tracking: The Next Features in LBSs, 41(4) Informatik (2011).