In the wake of the OECD’s BEPS project, there has been an explosion of interest in the closely related question of how tax systems ought to deal with highly mobile individual taxpayers.  The most obvious example of such a taxpayer is a high net-worth individual (HNWI) who can move easily between jurisdictions and whose choice of jurisdiction may be affected by tax rates, reliefs and administrative arrangements, amongst other considerations.  Yet we should not lose sight of taxpayers at the other end of the spectrum such as low-paid migrant workers, who may be paying considerable amounts of tax to their host jurisdiction without the capacity to make informed tax-efficient choices, or who, conversely, might be forced into the informal sector with few realistic opportunities to comply with their formal tax obligations.    

Either way, and as illustrated by recent debates surrounding the abolition of the UK’s preferential regime for non-domiciled individuals, individual mobility creates important challenges for democracy.  Contrary to the US Revolutionary slogan “no taxation without representation”, mobility can amplify the voice of at least some HNWIs even at the expense of revenue-generation (“reduce my tax liability or I shall leave”) at the same time as denying voice to others (“refugees must pay tax but cannot vote”).  In other words, it leads to potentially serious mismatches between taxation and representation.  Nor does citizenship provide any easy answers, despite its importance in signifying membership of political communities.  Citizenship has never been identical to subjection to the tax system (children, for example, are taxable but do not enjoy the full range of citizenship benefits), but in the context of ever-increasing individual mobility it is more difficult than ever to treat it even as a rough proxy for those who ought to be subjected to tax liabilities.  Indeed, tax systems can be expected to have to cope with increasing numbers of non-citizen taxpayers as well as non-taxpaying citizens.

Whether states ought to respond to these challenges with lower expectations of “no taxation without representation”, by making citizenship easier to obtain, by widening the franchise to include a wider range of non-citizens, or in some other way, raises an eye-wateringly complex series of questions that demand attention not only from lawyers but from a myriad of other disciplines.  It is hardly surprising, then, either that there has been a significant upswing in literature dealing with these topics, or that this literature has not yet settled on any consistent recommendations.   The Fiscal Citizenship Project, whose members are represented in the present volume, is perhaps driving the most systematic attempt to build a common vocabulary between disciplines, but it remains at a relatively early stage.

The present volume does not even attempt to compete as a systematic project.  On the contrary, it is gloriously various, representing the complexity of the problems involved as well as the sheer range of insights that are emerging across different jurisdictions and academic backgrounds. This approach is backed up by tolerant editorship that allows authors to speak for themselves rather than repeating an “editorial line”, which seems particularly well-judged in a young research area where the literature is still finding its way.  It encourages, instead of restricting or channelling, the growth of ideas.  All the same, variety is not the same as incoherence, and indeed the editors do an excellent job of drawing together the different strands and ensuring that the volume provides a meaningful and useful experience, whether read from the beginning to the end or dipped into. In this connexion, it is worth noting that both Lind’s introductory chapter and Brøgger and Björklund Larsen’s closing chapter focus on boundaries.  This is hardly a coincidence: the volume is all about boundaries, be they disciplinary, geographical, membership or tax conceptual. 

This neat bracketing of the issues is complemented by the exceptional clarity with which Bamford sets out many of the most relevant political philosophical questions in Chapter 2, which will be helpful for anyone working in this area but could equally be understood by the most recalcitrant first-year undergraduate.  In the following chapters, we read about a proposal for a more sophisticated concept of tax residency that would account for a wider range of life circumstances (Shanan and Narotzki); a new way of conceptualising fiscal citizenship (Schmidt and Matthaei); a proposal for increasing the relevance of tax payments to citizenship applications (Ramos Obando); an analysis of whether distinctions between citizens and non-citizens, if used carefully, might help states to respond to the challenges of taxpayer mobility (Lindsay); a discussion of the citizenship position of corporates (Scherer); the treatment of non-citizens within automated tax risk-management systems (More and Schenke); the importance, and misuse, of taxpayer status in defining political communities (Davis); the anomalous and potentially pointed exemption of agricultural workers in the US from certain fiscal obligations (Sarkar); the different status of taxpayers in the Canadian and Chinese tax systems (Li); and the scope, design and operation of cooperative compliance programmes in Norway and Sweden (Brøgger and Björklund Larsen).

I greatly enjoyed reading this book and would heartily recommend it to anyone who is or who might conceivably be interested in this emerging area of research.  In common with many if not most edited collections, the volume is not entirely even, either in quality or relevance to the topic.  Without wishing to single out any particular author, I sympathised with the attempts to develop theoretical and philosophical frameworks but felt that some were more successful than others.  I also thought that some of the boundary issues, in a field of study replete with boundaries, were presented by authors in a rather over-simplified or at least stylised way; still useful, but perhaps a starting-point for further discussion rather than a destination.   Finally, there is some evidence of “shoehorning” of topics into the scope of the volume, though, in balance, one of my most valuable experiences was realising that the final chapter on cooperative compliance is not at all shoehorned but instead highlights the themes of the book in a new and (for me) unexpected way.

These minor reservations, ironically, highlight one of the things that I enjoyed most about reading this volume, which is its exploratory quality.  It provides a coherent overall experience, as would be expected from editors of this calibre, but it is not overly tidied.  It is suggestive of directions rather than attempting to close down possibilities.  This, in turn, indicates a field of enquiry that is on its way up rather than one that has been answered and is exhausted of inspiration.  This sense of excitement and newness is more than captured in the volume and is one of its real strengths.  Apart from anything, it is fun to read, full of insights and inclusive.  It invites the reader to join in, and it is to be hoped that this invitation is accepted widely.

To start off with…

It is with great honour and joy I share these thoughts and reflections of mine, which is to be part of the Tax Research Network´s inaugural blog entries. In this blog entry, I am summarizing my ongoing research on taxation and democracy that I have been lucky enough to have shared in some Tax Research Network contexts already. 

The concept of taxation and democracy

Initially, my overall research ambition is premised on the idea that international tax competition, in combination with prior financial crises and the ongoing erosion of domestic tax bases, has led to a development where individual countries are intentionally designing their legal systems to attract affluent taxpayers who are mobile by choice,^[1] such as high-skilled workers, high-net value- and high-income individuals,^[2] while deterring poorer individuals, most often those who are forced to move, for instance asylum seekers and immigrants. 

In my study, inequality becomes visible as those mobile taxpayers who are considered desirable are awarded a more beneficial tax treatment and greater inclusion in society while those who are considered undesirable are subject to harsher tax treatment compared to the former group, as they are taxed equally to citizens, yet without receiving the same rights and benefits as citizens. The former group often enjoys preferential tax treatment through, for instance, expert tax regimes which are present in most jurisdictions.

In 2018, I was fortunate enough to read an earlier draft of Wolfgang Schön´s paper on Taxation and Democracy which was later published in the NYU Tax Review.^[3] The discussions in this paper inspired me to explore the situation for mobile taxpayers in a broader context than I had previously done in my dissertation. Thanks to a scholarship awarded by the Max Planck Institute for Tax Law and Public Finance in Munich, I was able to cultivate this ambition.

A study of the case of Sweden was undertaken with a focus on the relationship between formal citizenship, taxation, access to voting rights and social welfare benefits.^[4] The findings of the study accentuated that taxation, access to social welfare benefits and some voting rights (EU citizens having access to local elections) are dependent on territorial affiliation (residence). Contrary to this, citizenship is required for access to voting rights in the general election. Indicating that formal citizenship has become less important in some dimension than others. Furthermore, the general promotion of citizenship for awarding voting privileges nurtures mismatches stemming from lacking coherence and congruence between taxpayment and rights and benefits. Additionally, it also  perpetuates the separation between various taxpayer groups based upon social class and state of origin. These findings laid ground for a study on formal and informal citizenships, e.g., social-, fiscal- and political citizenship.

Various forms of citizenship

The biannual tax policy conference hosted by the Centre for Tax Law at Cambridge University enabled such an undertaking. In the publication that followed the event,^[5] I concluded that there are indeed informal citizenships which may be extracted from social, fiscal, and political dimensions. Social citizenship concerns the interaction with the welfare system, both through payments financing it and access to welfare benefits. Fiscal citizenship concerns an individual’s interaction with the tax system through, for instance, tax filing and tax payment. Political citizenship concerned an individual´s ability to influence their life situation through voting rights. It becomes apparent that there are different levels of inclusion in a community depending on what group of informal citizenship the individual in question is determined to belong to. Simply put, those individuals who are residing and participating in a community (through either social or fiscal citizenship) are at best considered mere guests, or at worst mere subjects, compared to citizens of the state if they are excluded from the right to democratically influence, through political citizenship, their own situation, and the community in which they participate in and contribute to. 

Comparative study built upon theoretical work done by tax scholars

The initial study relied on a more traditional legal doctrinal approach in which I attempted to underline democratic deficiencies through the application of differing legal frameworks (taxation and access to social welfare benefits and voting rights) to differing mobile taxpayer groups. The second study of informal citizenships attempted to explore the matter from a theoretical perspective which guided me in the direction of scholarly work done by Tsilly Dagan and Talia Fisher,^[6] Nancy Staudt,^[7]James Repetti,^[8] and Stan Levmore.^[9] This work inspired a more conceptual study to explore the possibilities of influencing one’s tax situation through taxpayer safeguards offered to differing taxpayer groups in Sweden, Germany, and the US. 

As a starting point the following question was proposed: – if an individual cannot influence their situation through traditional voting rights due to the lack of formal citizenship, are there any avenues to indirectly influence taxation and public spending (tax and spend) The findings of the comparative study indicated that an individual may indirectly influence tax and spend through various legal mechanisms and constitutional safeguards.^[10] Furthermore, the study clarified that there are differences between European states such as Sweden and Germany compared to the U.S. due to the influence of EU law, but also between Sweden compared to Germany and the U.S. For instance, it became clear that the historical development of respective legal systems played an instrumental part. The U.S. and Germany have both endured several constitutional crises which has left its marks and naturally strengthened the protection of individuals and citizens. Sweden, and the Swedish constitution, has not been exposed to the same trials which leaves it vulnerable to the challenges to both the present and the future. One explanation to this may be linked to the differentiation between civil law states (Sweden and Germany) and common law states (the U.S.) but also the differentiation between unitary states with a strong legislative power (Sweden) compared to federal states with a strong judicial power (Germany and the U.S.). The latter leads to stronger constitutional safeguards and the tradition of judicial review in addition to explaining why the principle of equality has (at least at first glance) had a greater impact in Germany and the U.S. compared to Sweden. In other words, a federal state will need to have safeguards ensuring a coherent and non-discriminatory tax legislation as the legislative power is located on several levels and not exclusively centralised. Differences rooted in legal cultures and historical development between the three studied states were of course also of importance. 

Opinion or potential research approach?

These initial studies of mine are admittedly somewhat dispersed but assisted in focusing my research interest when considering the topic of taxation and democracy. The primary assumptions that I currently pursue in my research are: 1. there is a common level of inequality between differing taxpayer groups, and 2. that a minimum level of taxpayer protection should be pursued and enforced by legal systems to uphold the principle of equality. In response to this thought-provoking question concerning research neutrality and legitimacy, it is indeed true that states are, and should arguably be, free to design their tax systems as they please. The core issue is to what extent they can or should do so. Despite retained tax sovereignty there are some common features present within all legal systems that prevent, or are at least intended to prevent, an unequal treatment of individuals. These features are presently, when considering the political and legal developments around the world, of great importance and relevance. If choosing to embark a study underpinned by above-described assumptions, there are both legal principles and theories that may assist the exploration of inequality in connection to mobile taxpayers when considering the tax treatment and integration they are subject to in states other than that in which they have citizenship. The principle of equality which is to be found in most national constitutions in addition to the EU principle of non-discrimination are both good examples of legal instruments that may be employed when analysing inequality between differing taxpayers. 

In this context, I would also like to highlight taxpayer protection. The legal and constitutional protection of individuals is arguably stronger within tax law than other areas of law due to individuals inherently being subject to taxation. Due to the invasive nature of taxation, there is a greater need for taxpayer protection. Within the tax scholarship, taxpayer protection has generated considerable attention, primarily through research on legal principles such as the principle of legality, the principle of equality and the principle of non-discrimination. Research on taxpayer protection has become more relevant within the tax scholarship over the last decade. However, tax scholars have focused on corporate taxpayers rather than individual taxpayers. This is most likely a result of the corporate perspective being prevalent within the scholarship in general, but also reflects the response to the extensive corporate tax harmonisation that has taken place globally. In my opinion, this is a significant omission that precludes a comprehensive understanding of the origin, extent, and impact of taxpayer protection applicable to individual taxpayers and in particular those who are mobile across borders. 

In conclusion

In conclusion, I hope to have shed light on a research topic that is not only of importance to the tax community but also impacts on aspects of integration into society, the global labour market, social justice, and inequality. To my great joy, there has been an increased research interest into matters concerning taxation and democracy. Existing scholarship includes tax scholars such as Stephen Daly and Rita de la Feria have started exploring the topic and attracted well-needed attention. Tax scholars such as Giorgio Beretta, Giedre Lideikyte-Huber, and Ruth Mason have explored formal citizenship through the tax dimension.^[11]Dominic de Coogan´s most recent monograph adds new knowledge through his discussions on state building and will surely inspire additional scholarship.^[12] Lynne Oates, and associated colleagues, were recently awarded external funding for a three-year interdisciplinary research project titled “Fiscal citizenship” with the aim to raise awareness to issues related to migration, fiscal citizenship, and the intersection between the two. We even witnessed a session devoted to the theme at the EATLP congress earlier this year. All of these developments provide a highly inspirational tax environment.

^[1] Tsilly Dagan. International Tax Policy. Cambridge University Press 2017. Stark, Johanna. Law for Sale. Oxford University Press 2019.

^[2] Ayelet Shachar. The race for talent: Highly skilled migrants and competitive immigration regimes. New York University Law Review vol 81 2006.

^[3] Wolfgang Schön. Taxation and Democracy. NYU Tax Review vol 72 no. 2 2019.

^[4] Yvette Lind. Voting rights compared to income taxation and welfare benefits through the Swedish lens. Florida Tax Review, vol. 23 issue 2, 2020, pp. 713-742

^[5] Yvette Lind. A critical analysis of how formal and informal citizenships influence justice between mobile taxpayers, in Edits. Dominic de Cogan and Peter Harris, Tax Justice and Tax Law: Understanding Unfairness in Tax Systems, Hart publishing, 2020, pp. 117-133  

^[6] Tsilly Dagan and Talia Fisher. State Inc. Cornell Journal of Law and Public Policy vol. 27  Issue 3 , Article 7, 2018. Tsilly Dagan and Talia Fisher, Rights for sale, Minnesota Law Review, Vol. 96, 2012 pp. 90-140.

^[7] Nancy C. Staudt, Taxation without Representation, NYU Tax Law Review vol 55. 2002 

^[8] James R. Repetti, Democracy, Taxes and Wealth, NYU Tax Law Review vol. 76 no. 3, 2001 pp. 825-873.

^[9] Stan Levmore, Taxes as Ballots”, University of Chicago Law Review, vol 65 no. 2 1998.

^[10] Yvette Lind. Initial findings on how individuals may indirectly influence tax and spend in Sweden, Germany and the United States, Intertax, vol. 48 no. 5, 2020, pp. 482-497

^[11] Giorgio Beretta. Citizenship and tax. World tax journal vol. 11 no. 2 2019. Giedre Lideikyte-Huber. Taxation without Representation: The Case of Resident Non-Citizens. Bulletin for International Taxation vol. 69, no. 10 2015. Ruth Mason. Citizenship Taxation. Southern California Law Review vol. 89 no. 2 2016.

^[12] Dominic de Cogan. Tax Law, State-Building and the Constitution. Hart Publishing 2020