Investigating the effects of Finnish preferential foreigner tax scheme on high-income immigration
Linnunsalo, Aino (2024)
2024
Kauppatieteiden maisteriohjelma - Master's Programme in Business Studies
Johtamisen ja talouden tiedekunta - Faculty of Management and Business
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Hyväksymispäivämäärä
2024-05-13
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:tuni-202405065465
https://urn.fi/URN:NBN:fi:tuni-202405065465
Tiivistelmä
Previous literature has demonstrated that high-income individuals’ migration decisions are highly responsive to changes in economic incentives such as income taxation. This, together with global demand for specialized expertise has prompted several countries to implement preferential tax schemes to attract immigrants with high human capital, measured via income. In Finland, such scheme has been in place from January 1996. Yet, its effects have yet to be investigated thoroughly.
In this thesis I study the Finnish preferential foreigner tax scheme’s effects on immigrations, migrant popu- lation, and lengths of temporary immigrations. I exploit variation from the implementation of the scheme in 1996 and a reform of the scheme in 2007. I utilize Differences-in-Differences to estimate the effects of these reforms on yearly eligible immigrations, migrant population residing in Finland at the end of each year, and the lengths of temporary immigrations. Additionally, I estimate migration elasticities with respect to average net-of tax rates using Two-Stage Least-Squares.
While high-income immigrations to Finland have clearly increased through years, I find no evidence of the Finnish preferential foreigner tax scheme explaining this trend. I also demonstrate that the average characteristics of high-income immigrants have changed over time. Further, I present preliminary evidence of the immigrants’ temporary migration duration distributions changing over time.
In this thesis I study the Finnish preferential foreigner tax scheme’s effects on immigrations, migrant popu- lation, and lengths of temporary immigrations. I exploit variation from the implementation of the scheme in 1996 and a reform of the scheme in 2007. I utilize Differences-in-Differences to estimate the effects of these reforms on yearly eligible immigrations, migrant population residing in Finland at the end of each year, and the lengths of temporary immigrations. Additionally, I estimate migration elasticities with respect to average net-of tax rates using Two-Stage Least-Squares.
While high-income immigrations to Finland have clearly increased through years, I find no evidence of the Finnish preferential foreigner tax scheme explaining this trend. I also demonstrate that the average characteristics of high-income immigrants have changed over time. Further, I present preliminary evidence of the immigrants’ temporary migration duration distributions changing over time.