Abstract
In the article we argue that the origins of the international tax base erosion in the corporate sector, which are the harmful tax competition for capital and old-fashioned international tax rules, are also relevant for the taxation of income of the high-skilled and mobile workforce. Therefore, a multilateral rethinking of the global tax architecture is proposed in order to conceptually address the problem properly and in a harmonized manner. We point out, based on the examples of Russia and Serbia, several problems of tax base erosion for mobile talents, with a case study analysis of scenarios of talent migration involving sportspersons, researchers and IT specialists. Finally, we propose some ideas for global tax cooperation in order to mitigate the negative tax effects of brain drain based on adapting the existing recommendations of the BEPS Project for the cases of migrating individuals.
Highlights
Imagine you are playing Who Wants to Be a Millionaire? on Italian TV
Such tax policy outcomes can potentially result in the losses of tax revenues from personal income tax by the countries suffering from the problem of the brain drain
If an athlete ceases to be a tax resident of the country, which is a common scenario in the context of brain drain, the donor country loses its right to tax the income of such athlete until he physically arrives and take part in sporting events in the country
Summary
Imagine you are playing Who Wants to Be a Millionaire? on Italian TV. The host asks you the last question (the answer to which can set you up for the rest of your life) – “What makes Italy lose about 14 billion euros annually, which equals approximately 1% of its GDP?” (ANSA Politics 2019) You are given four options, but you don’t know the correct answer to the question. You call your old friend, but on the end of a telephone they tell you that he moved to another country for a better life. Ok, you take another lifeline, 50:50, but the host apologizes and tells you that the show editor was recently offered higher salaries in the US, and he quit. – emigration of educated or professional people from one country, economic sector, or area for another usually for better pay or living conditions;. In our opinion, the problem of brain drain is still closely intertwined with tax issues both in the original country of residence of the individual and in his new jurisdiction. As Mohapatra (2012, 1) notes “the emigration of workers, especially highskilled workers, is often perceived to create a fiscal loss – when considering the cost of educating these workers and foregone tax revenues for the home country.” Global challenges require global solutions, this article is focused on the search and development of such global approaches to cooperation in the area of taxation, aimed at solving the abovementioned problem of brain drain and losses of tax revenues, and to streamlining the global approaches to taxation of income of mobile talented professionals
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