Brussels is examining the possible impact of levying \u201cexit taxes\u201d on any of its citizens looking to escape the European Union.<\/p>\n
According to a report quietly published by the Commission in mid-April, taxing emigrants could be a key part of implementing a broader system of wealth taxes on Europeans, with the document claiming that charging people for unrealised gains could help lower income inequality.<\/p>\n
An additional tax on ending your tax residence in one of the EU\u2019s 27 member states, the report concludes, could prevent high earners from escaping the bloc without paying.<\/p>\n
\u201cExit taxes, when carefully designed and coordinated, can serve as important tail provisions to safeguard revenue in the presence of cross-border mobility,\u201d the report\u2019s executive summary\u00a0 \u2014 which was commissioned by Brussels\u2019 Directorate-General for Taxation and Customs Union \u2014 said.<\/p>\n
It added that while there was \u201cno single model\u201d of wealth taxation that would suit every single one of the bloc\u2019s member states, implementing some form of tax on unrealised gains would help each country develop \u201cboth equity and efficiency in the EU\u201d.<\/p>\n
\u201cThe report concludes that exit taxes work best as part of a coherent capital gains tax system, ensuring that gains accrued domestically are taxed on a fiscally fair basis,\u201d it adds.<\/p>\n
Contrary to other claims on the topic, the report argues that a new tax system involving both wealth taxes and exit taxes on citizens could increase entrepreneurship, claiming that people may be pressured into being more productive with their assets if they are constantly being taxed by the government.<\/p>\n
They also downplay the risks of capital flight before the the tax can be implicated, though do express fear that both charges could reduce the rate of immigration into the European Union.<\/p>\n
As a result, the researchers encourage countries to make sure that most non-EU citizens are exempt from paying exit taxes so that the EU can benefit from imported low and high-skilled workers.<\/p>\n
\u2018[E]xit tax policy can also decrease the immigration of high-net-worth individuals,\u201d it says.<\/p>\n
\u201cTo minimise the detrimental effects on labour mobility, it is important to set residence conditions so that temporary labour migration is not affected. Setting sufficiently high value thresholds is also important.\u201d<\/p>\n
A number EU countries, including Spain and Germany, have already implemented various forms of exit taxes on their citizens and long-term residents, with the majority of systems focusing on unrealised gains on assets.<\/p>\n
The majority of members do not engage in taxing emigrants, though some nations \u2014 including Ireland \u2014 levvy charges on assets accumulated while in the country should they be sold shortly after the owner becomes a tax resident somewhere else.<\/p>\n
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