European Economic Area (EEA) citizens based in the UK pay more in income taxes than Wales and Northern Ireland combined, according to analysis by Opal Transfer, a fintech money transfer service, which warns that a ‘hard’ Brexit with strict controls on EU and EEA migration could result in a dip in tax revenues
The company highlights figures released by HMRC which show that EEA citizens paid £16.4bn in income tax and national insurance (NICs) combined in 2014-15, the most recent data available. This was £3bn higher than that of Northern Ireland and Wales combined (£13.4bn), despite there being 1.4 million fewer Europeans in the UK than the five million people in N Ireland and Wales.
Overall EU citizens are paying 5.7% of the total income tax in the UK take despite accounting for 5.5% of the UK population. In addition to this, 192,000 (6.6%) Europeans are higher rate taxpayers.
Opal Transfer says that these figures challenge the preconception that European migrants are here to claim benefits and tax credits. EEA nationals who have moved to the UK since April 6 2011 are claiming less than 2% of all tax credits.
Gita Petkevica, managing director of Opal Transfer, said: ‘These figures produced by HMRC confirm absolutely that, Europeans are a vital part of the UK economy.
‘The amount of tax being paid by Europeans, compared to the number of tax credits received should confine the more negative images of Europeans in the UK to the past.
‘The government should now consider the impact that reducing levels of EU nationals living and working in the UK could have on future HMRC tax receipts and what that could mean for public services.’
KPMG is also sounding warnings about the potential impact of a Brexit brain-drain, following an international survey of 2,000 EU citizens working in the UK and 1,000 EU citizens from the 10 countries most likely to supply EU labour.
This revealed that while 45% of EU citizens working in the UK plan to stay, 35% are considering leaving and 8% have already made up their minds to go.
When extrapolated across the UK’s entire EU workforce, KPMG says this is equivalent to almost one million potential leavers, or 3.1% of the UK’s national workforce.
According to the research, the EU workers most likely to leave the UK are what KPMG UK is calling ‘INDEYs’, the independent, in-demand, educated and young. Illustrating this point 50% of respondents with PhDs and 39% of those with postgraduate degrees said they are thinking about leaving the UK. Similarly 52% of those earning £50,000k - £100,000 said they plan to leave or were thinking about it.
Against this background, KPMG warned that the UK’ is vulnerable to losing some of its IT professionals, creative minds, engineers and specialist finance professionals, to name but a few.’
In addition, half (49%) of EU citizens in their home countries interviewed for the survey feel the UK has fallen in desirability as a place to live and work.
Karen Briggs, head of Brexit at KPMG, said: ‘Our survey highlights how important the actions of employers are going to be if the UK is to avoid a Brexit brain-drain. Although almost half of the EU citizens working in the UK plan to stay, what other EU citizens choose to do is definitely hanging in the balance.
‘Against this backdrop we expect to see increased competition for talent between employers over the coming years, and numerous firms seeking to supplement their workforce with AI, robotics and automation.’
KPMG’s report, The Brexit effect on EU nationals, is here.
