Competing for mobile skills: fiscal citizenship and migration in Europe

While the EU Commission ponders strategies for attracting and retaining skills and talent to boost the EU's competitiveness and long-term growth, many European governments are turning to preferential tax policy in an increasingly competitive bid for desired workers. Once largely associated with corporate tax competition, fiscal incentives are increasingly being used to attract skilled workers and to re-attract and retain emigrated citizens. This is unfolding not only in response to skills shortages, but also in a context of free movement within a pan-European labour market, ageing populations, and regional depopulation pressures. Tax breaks are a curious policy choice, both from a functional and democratic perspective: while preferential tax regimes are often politically framed as pragmatic policies to boost competitiveness and human capital or encourage return migration, they raise important questions about distributive fairness, unequal treatment, and democratic legitimacy. Moreover, they may challenge longer-term sustainability of welfare states and risk serious race to the bottom dynamics between EU countries, potentially undermining wider social investment and skills policy. Against this background, this paper tries to better understand this policy trend and the politics driving it. It draws on theoretical and empirical debates from migration, political economy and social policy studies, and relies on policy debates, political documents, descriptive statistics and secondary literature. First, it maps the content, target groups, and available evidence on the effects of preferential tax regimes for mobile workers across the EU. Here the resulting inequalities between mobile and non-mobile workers are highlighted amongst other things. Second, focusing on Italy, Portugal, and Spain the paper analyses the political motivations, actor coalitions, and policy narratives underpinning the adoption of these measures, also revealing how the policies relate to broader skills, demographic, and migration agendas. Taken together, the paper offers an overview of and new insights into an increasingly popular instrument of governance with consequences for social Europe.