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It’s no coincidence that researcher Lisa Timm co-authored a paper about highly skilled workers who move to the Netherlands from other parts of the world.

She was born in Germany and went to university there. Since 1994, she has lived and worked in the Netherlands, where she does research at the UvA Amsterdam School of Economics on issues relating to migrant labour. Her first paper is about tax incentives for highly skilled migrant workers. Together with Massimo Giuliodori and Paul Muller, she examined whether lower taxes can persuade well-educated people from other countries to work in the Netherlands. This turned out to be the case.

Netherlands more appealing to people earning over €35,000

Timm, Giuliodori and Muller found that the implementation of a legislative change in 2012 has made the Netherlands more appealing to people who earn €35,000 or more. Most migrants meeting this requirement qualify for a scheme that exempts 30 per cent of their earnings from income tax. The scheme is valid for 5 years, after which foreign employees who work in the Netherlands pay just as much tax as Dutch employees. There was another arrangement before 2012, but many people found it less transparent. As Timm explains: ‘People are now better able to judge whether they’re eligible for the scheme, which seems to be particularly important to workers who are not from the EU. This group especially has grown bigger, probably because it’s more expensive for non-EU nationals to come to the Netherlands. They can’t travel freely and need a visa among other things. If they do opt for the Netherlands, they want to be certain it’s the right decision. And that certainty includes such things as 5 years of lower taxes.’

Battle for highly skilled workers from abroad

Not only the Netherlands is trying hard to attract highly skilled workers from other countries. Other European states, like Sweden and Denmark, also have special arrangements for this target group. Timm observes: ‘You see a kind of competition emerge. Companies are urgently looking for highly skilled workers and communicate this to their government. The Danish scheme is a lot stricter than the Dutch one. In Denmark, migrants don’t pay lower taxes unless they’re in the top 1 per cent of income earners. This is quite a small group. For the Netherlands, our study shows that migrants with a mid-range income between €35,000 and €40,000 are also influenced by the scheme in their decision to move to the Netherlands.’

Effect on housing market

Timm is far from finished with the subject and would like to do more research into the issue. What she’ll be working on next is whether and how the tax incentive affects the housing market. Timm elaborates: ‘This is a hot topic right now and it certainly was during the recent elections. It’s often suggested that house prices are rising because of expats. Together with my colleague Flavia Paoloni, I want to investigate whether that’s indeed the case. We’re also interested to know how the measure affects wages in general. It’s a delicate subject and we need to tread carefully. Many people are concerned about the housing market. Their concerns are justified but I want to prevent expats from being given the blame. You sometimes see this happen in the news nowadays and it’s just too simplistic.’

High taxes

Timm would also like to explore what employees do at the end of the 5-year arrangement. Do they stay in the Netherlands, or do they look to work in another country? She says: ‘It seems that the most skilled foreign workers leave after 4 years regardless. So that’s before the scheme ends. These are often young people who like to change jobs regularly. About 25 to 30 per cent decide to stay and so, when the 5 years are up, pay the same taxes as Dutch workers. One of our findings is that the scheme brings in just as much as it costs. This is because the people who stay earn relatively high incomes and pay high taxes. So, the scheme attracts relatively large numbers of high-income earners, who pay a lot in tax.’

Wealth of data

Timm, who is extremely keen to continue her research, goes on to say: ‘I think it’s amazing that there’s so much data available in the Netherlands. It makes things truly fascinating though also complex. And it means you can do very comprehensive research. I’ve always been interested in learning why people go out to work and what happens in a working environment. Almost everybody works or has done so at some point. And I’m part of a generation who grew up in a Europe without borders. We consider it perfectly normal to move in pursuit of a job. For me, it means I now have friends from all over the world. It’s simply great that, in doing this research, I can combine my academic curiosity with my personal experience.’