Unrest in France

Attention on the riots in France has focussed on the cultural issues relating to the integration of migrants, something which is affecting most of the countries of Western Europe. Migration from all over the world is one of the legacies of far-flung empires, but it is undeniable that migrants belonging to one particular group have particular difficulties. There is, however, an important economic dimension to the failure of integration policies which has been little mentioned. It is one which also has an impact on young people of European origin.

Elsewhere on this website, there is an analysis of what we have described as “Employers’ Burden”, which attempts to look behind what has been described as the “PAYE Illusion”, the notion that employees pay tax on their gross wages. It is one of the misconceptions that gets in the way of rational debate on taxation and its impact on the economy.

The effects are clearly visible if one looks. Checkout operators in supermarkets are replaced by self-service machines. Street sweepers with brooms are replaced with machines which “save labour”, but do not do the job properly. These are precisely the kinds of jobs which would, and could, have been done by less able school-leavers and migrants with poor language skills.

VAT is another tax which has locked out migrants from the legal economy. Small businesses have a wall of administration to deal with and are hounded by the tax authorities – and this is precisely the sector of the economy where migrants traditionally gained a toehold in society and could make a livelihood instead of being a burden on the state. If the aim was to lock migrants out of the economy, there could be no better means than VAT, yet this tax is mandatory within the EU, and it is the very basis of EU finance; it is perhaps not a coincidence that Romania, Malta and Italy have the largest VAT gaps in the EU, according to the EU’s own statistics, the VAT gap in Romania standing at a staggering 35.7%. Remarkably, the EU web page makes no mention of the chronic problems that are inherent to VAT, nor is there there any indication that alternative and more robust sources of revenue are being sought.

When people who attempt to make an honest livelihood are thwarted at every turn by the tax system, it is not surprising that a mood of frustration and despair spreads over the neighbourhoods where migrants have settled; entire cohorts of young people can expect nothing better than a life on benefits, supplemented by earnings from crime. Unfortunately, tax is not usually acknowledged as part of the problem, and serious discussion of reform is not to be found in the arena of public debate.