The Taxation of Frontier Workers

The most pressing economic problem in Europe is the surge in unemployment. The economic literature widely agrees that the growth of real gross wages in excess of the growth of total factor productivity is an important reason for this development. The policy implications of this view are straightforward: to lower the real costs of wages through tax and social insurance reforms seems to be an important topic an the national economic agenda. In addition to this, there also exists an international perspective of the tax burden of labor. As far as international mobility acts as a possible mechanism to increase the efficiency of the labor market, differences in the taxing and social insurance regimes can act as obstacles to such improvements. Apparently, labor mobility is a very complex issue with different manifestations. The objective of the Research Project "The taxation of frontier workers" is to analyze the economic effects of the tax and the social insurance system an one form of international labour mobility, namely cross border commuting. There already exists a broad theoretical and empirical literature an the commuting decision in general. But this literature studies the commuting decision in an instrastate regional framework. This implies that the institutional setting - as far as taxation and social security is concerned - at least in the majority of the EU-countries does not change fundamentally, when people commute. The theoretical and empirical evidence an the role of differences in the tax and the social insurance system an the labor supply decision of frontier workers is still scarce and inconclusive. Based an the above mentioned literature an commuting we want to focus an the following questions: Which impact do taxing and social insurance systems have an the labor supply decisions of frontier workers compared to other economic and social forces? How do frontier workers use public services (especially health care services) in the country of residence and in the host country? What are optimal tax and socical security regimes in the context of cross border commuting? The research project extents the existing knowledge an commuting to cross border commuting and especially stresses the role of the taxing and social insurance regimes as a factors which might influence commuting. lt analyzes the combined effect of taxes and social insurance contributions and benefits an the commuting decision. lt establishes a micro data set for a specific border region (Vorarlberg- Schweiz-Liechtenstein) based an questionnaires. Methods of microcconometrics will be used to derive empirical results and economic conclusions.