Transnationalism and tax payments among the foreign-born

Many people spend parts of their lives in New Zealand, parts elsewhere, building connections across national boundaries. This paper is the third in a set of three that start exploring the fiscal implications of this transnationalism. The first paper in this set developed a dataset and defined a series of concepts to support the substantive papers. The second focused on people with citizenship via birth in New Zealand. It found high levels of emigration, and also high levels of return migration (of the OE type), especially among younger and more highly educated New Zealanders. This paper focuses on foreign-born people who have ever migrated to New Zealand under the official Stats NZ definition. An arrival is defined as a migration event if someone was not living in New Zealand prior to the arrival, but spends twelve or more of the next sixteen months in New Zealand. Over half of foreign-born people to migrate to New Zealand leave again within fifteen years. Return or onward migration is most common among students and temporary workers, but it is also common among people who first migrated under a residence-class visa. For example, among people who first migrated to New Zealand in 2010 and arrived on a residence class visa, 9,200 (68%) were still resident in 2024 (3,800 were overseas, and 400 were deceased). To fully understand the fiscal implications of these transnational movements would require complex modelling of labour market outcomes, tax payments and expenditure incurred over time. The Australian Treasury has completed such an exercise, to conclude that the net fiscal impact of a new arrival in Australia is positive (Varela, et al, 2021). This paper provides a tentative step in that direction by exploring tax payments, leaving expenditure and labour market outcomes to be considered in future. The focus is on tax paid on personal market income (primarily PAYE taxes). The central finding of this paper is the simplest. In aggregate, the foreign-born are becoming increasingly important for the country’s tax base. Foreign-born people made up 24% of the population in 2000, also paying 24% of individual tax on market income. Since then, the foreign-born’s share of the population has grown, and their share of tax paid has grown even faster. In the tax year ending March 2024, the foreign-born made up 32% of the population, and paid 38% of the tax. That foreign-born migrants’ share of tax is higher than their population share partly reflects their age structure. Compared to the NZ-born, foreign-born people are less likely to be young and old, and more likely to be middle-aged, the stage of life when tax payments tend to be highest (Wright and Nguyen, 2024). However, age composition alone does not explain all the difference, and there is also substantial variation in the amount of tax paid by different migrants. Most of this paper provides simple descriptive analysis of tax distributions according to various characteristics of the foreign-born. These are simple descriptive statistics that provide no account of any broader economic effects associated with migration (or changes on the margin to migration policy settings). Yet they illustrate that migration settings are an important factor influencing Government’s overall revenue. There are many useful directions this work could be taken by future researchers, as discussed at the end of this note.