Imposta sul sorte versamentare
| Imposta sul sorte versamentare | |
|---|---|
| Non-Commercial Capital Regulation Act, 2010 | |
| Citation | 114 F61 IM(b) 11.073 10/2010 |
| Enacted by | Republican assent |
| Date commenced | February 1, 2011 |
| Status: In force | |
The Imposta sul sorte versamentare (ISV; English: Solidarity Outflow Levy, Empordian: impost sobre remuneració a l'estranger, Spanish: impuesto a las remesas al exterior) is a tax on foreign remittances by the Pacitalian government. The tax acts as a form of restriction on capital outflow, also known as a "capital control".
All outgoing international money transfers, regardless of the amount, are subject to a deduction of a progressive percentage, which increases based on the gross amount remitted.
Background
The tax was proposed as early as 2005, but first appeared in successful legislation in 2010, and subsequently entered into force in 2011. It was designed as a way to collect revenue on non-commercial international financial transfers, which surpassed Ð 1 trillion (~$2.8 trillion) for the first time in 2011, the year the tax went into effect. As with most industrialized, developed nations, foreign workers have been migrating to Pacitalia for decades to take advantage of higher incomes and standards of living. These workers send portions of their earnings back to their home countries to supplement household income and support relatives with household expenses.
| ISV income per year ('000s Ð) | ||
|---|---|---|
| Year | Amount | Change |
| 2011 | 4,392,204 | |
| 2012 | 8,631,401 |  96.5%
|
| 2013 | 10,313,202 | 19.5%
|
| 2014 | 12,650,090 | 22.7%
|
| 2015 | 14,781,222 | 16.9%
|
| 2016 | 16,101,878 | 8.9%
|
| 2017 | 20,631,481 | 28.1%
|
| 2018 | 23,202,255 | 12.5%
|
| 2019 | 26,393,450 | 13.8%
|
| 2020 | Suspended due to COVID-19 | n/a |
| 2021 | ||
| 2022 | 35,285,008 | 33.7% (from 2019)
|
| Source: Pacitalian Ministry of the Interior | ||
The source of funds for these transfers is almost always income that has been taxed by the Pacitalian government. However, the government estimated in 2014 that as many as 2-3 million foreign workers, especially in the agriculture and tourism sectors, may, in fact, be paid "under the table" and are not paying income tax in Pacitalia. Given that legal foreign workers have a constitutional right to access public services like health care while they are in the country, capital outflow exacerbates the potential for public expenses to support those workers to go unrecovered through normal processes like income taxation. The ISV is, therefore, meant to help ensure that income earned in Pacitalia is subject to at least some tax, in exchange for foreign workers' ability to access public services.
Collection of the tax was suspended in 2020 and 2021 due to the COVID-19 pandemic, but resumed in 2022. The Pacitalian government reported over Ð 35 billion (~$98 billion) in revenue from the ISV in 2022, representing roughly 0.5 percent of gross tax revenue.
Criticism
Like almost any form of tax, the ISV has both supporters and detractors. Proponents of the tax point out that the tax is applied to any outgoing international transfer of funds, so it does not only penalize foreign workers remitting money abroad. They also point out that the tax helps to offset any lost revenue that should be collected from foreign workers who are benefiting from access to public services but may not be reporting their employment for income tax purposes. Supporters have also argued that a capital outflow tax is meant to ensure solidarity in civil society by ensuring that Pacitalians further benefit in some way from income earned in the country.
On the other hand, many economists and public policy experts on the left and right have disapproved of the tax, albeit for different reasons. Leftists argue a tax on non-commercial capital outflows perpetuates inequality between rich and poor countries, and can have the opposite of intended effect, acting as a barrier to household ability to support themselves, thereby making them more likely to rely on other social programs, such as income assistance.
Liberal and conservative economists argue that the ISV does nothing to discourage money laundering, acts as a "double tax" on money that was already taxed once as income, and say that the tax acts to suppress economic and workforce growth, by potentially influencing migrant workers choosing whether or not to come to Pacitalia to work. The agriculture and tourism sectors, for example, rely heavily on foreign workers, and both are among the five largest sectors of the Pacitalian economy, magnifying the potential effects if employers have trouble attracting workers.
General criticisms of the tax are that it adds unnecessary administrative cost for the Pacitalian government, and that the tax is more motivated by politics than fiscal prudence, given that it represents such a small portion of overall tax revenue. In 2022, the Pacitalian government collected just over Ð 2.46 trillion (~$6.8 trillion) in gross taxes.
Alternatives
A handful of alternative policy solutions have been proposed to better manage the issue the ISV is intended to address. They include:
- better oversight to ensure workers declare income and pay income tax
- applying a tax on foreign workers as a source deduction rather than at the time of remittance
- tax incentives for certain industry sectors to encourage them to declare employees and record wages
- expediting visa, residency permit and permanent residency programs for foreign workers and their families
Political considerations
The tax is generally popular, with a slim majority of Pacitalians supporting it as of 2020, when the last poll was done on the issue. Numerous polls and studies have indicated that Pacitalians are generally in favour of any tax policy that seeks to keep capital in the country.
In September 2023, the centre-right Federation of Progressive Democrats proposed eliminating the ISV, as an early campaign promise ahead of the 2023 election.