Ten Years Out

Migration — legal and illegal — will be a central concern for western politicians over the next decade or more, and western businesses will find it hard to steer clear of the controversy.

To understand the pressures, you simply need to look at some global demographic trends, as well as the impact of climate change on countries susceptible to drought.

The population of Africa, for example, is currently around 1.2bn but is projected to reach nearly 1.6bn in 10 years and to more than double to over 2.5bn by 2050, according to UN data.
By contrast, Europe’s population is expected to remain stable at 740m. The median age of Africans is about 20 years, according to UN data, whereas the EU estimates the median age of its citizens is about 43.

In the age of the smartphone and social media, it is easy to understand why increasing numbers are planning the often perilous journey from Africa to Europe: many have already made it and can share their experience.
Africa is not the only region whose nations’ populations are on the move to Europe. There are also established routes from central and southern Asia, from countries such as Afghanistan and Bangladesh that face many of the same economic and environmental pressures as Africans.

In 2016 alone, nearly 1.3m asylum applications were made in the EU and the European Free Trade Association countries; the top five sources of asylum seekers were Syria, Afghanistan, Iraq, Pakistan and Nigeria. Many more are likely to attempt similar crossings over the next decade.

Migration — legal and illegal — will be a central concern for western politicians over the next decade or more, and western businesses will find it hard to steer clear of the controversy.

To understand the pressures, you simply need to look at some global demographic trends, as well as the impact of climate change on countries susceptible to drought.

The population of Africa, for example, is currently around 1.2bn but is projected to reach nearly 1.6bn in 10 years and to more than double to over 2.5bn by 2050, according to UN data.

By contrast, Europe’s population, currently about 740m, is expected to remain stable. The median age of Africans is about 20 years, according to UN data, whereas the EU estimates the median age of its citizens is about 43.

In the age of the smartphone and social media, it is easy to understand why increasing numbers are planning the often perilous journey from Africa to Europe: many have already made it and can share their experience.

Africa is not the only region whose nations’ populations are on the move to Europe. There are also established routes from central and southern Asia, from countries such as Afghanistan and Bangladesh that face many of the same economic and environmental pressures as Africans.

In 2016 alone, nearly 1.3m asylum applications were made in the EU and the European Free Trade Association countries; the top five sources of asylum seekers were Syria, Afghanistan, Iraq, Pakistan and Nigeria. Many more are likely to attempt similar crossings over the next decade.

The US faces similar problems. Negative reactions to illegal immigration from Latin America helped drive the rise to the presidency of Donald Trump, with his famous promise to “build the wall” between America and Mexico. Flows of illegal migrants have slowed in recent years, but as long as there is a significant wealth gap between the US and Latin America, the temptation to move north will be strong.

Western politicians will be on the front line of those framing a response to migration pressures, but business is also likely to be drawn in. That is because the political pressure to control immigration has fused the question of illegal migrants with the broader one of competition from immigrant labour.

President Trump has promised not just to crack down on “undocumented workers”, but also to restrict the use of work visas for skilled migrants, a group particularly favoured by the tech industry.

The UK government, meanwhile, has promised to bring legal immigration down into the “tens of thousands”, which would mark a very sharp reduction from current levels.

Policies such as these have implications for all businesses in prosperous western countries. For example, the survival of fruit growers in California and the east of England, which rely on a supply of low-cost migrant workers to pick crops, could be threatened if the flow of workers is disrupted.

Higher up the value chain, tech companies in Silicon Valley or Britain’s Silicon Fen are accustomed to being able to hire skilled workers from all over the world: a survey of Silicon Valley businesses found that 57 per cent of tech workers were born outside the US.

From a business point of view, it makes sense to lobby for a liberal migration policy. But business people who get directly involved in these most sensitive of political matters become vulnerable to a political backlash. George Soros, the billionaire financier, has been the subject of a vicious campaign by the Hungarian government for speaking out in favour of refugees’ rights. Large businesses that enter controversial political debates risk consumer boycotts or pressure from investors and the media. Many would prefer to keep their heads down, particularly at a time of increasing polarisation.

Even those business people who restrict themselves to vouching for legal migration are potentially vulnerable amid mounting criticism that such policies favour companies at the expense of indigenous workers. As public opinion hardens against the forces of globalisation, business people will need to think hard about whether they want to court further controversy by wading into the migration debate. Gideon Rachman

With global public debt close to an all-time high, governments have rarely been so strapped for cash. As they cast around for revenue, it has become clear that they see companies as an important part of the solution. Ten years out from now, businesses will be responsible for collecting even more data on individuals and contributing far more to the collection of tax revenues than they do currently.

The financial problems governments need to solve are severe. Economists at the OECD estimate that as much as a tenth of all corporate tax revenues are lost to avoidance — the legal exploitation of tax loopholes — across the world. Meanwhile, fraud is largely responsible for a failure to collect 13 per cent of value added tax (VAT) revenues in the EU, according to the European Commission. Tax evasion and the informal economy are reported to be responsible for even higher losses.

In many jurisdictions, companies are being forced to hand over information that could be used to police the tax system against fraud, avoidance and errors. This information is contributing to a vast resource of information about taxpayers. As tax authorities’ hunger for information grows, it demands to be satisfied more frequently. Employers in the UK used to report salary payments once a year but are now required to report them when they are made.

Similarly, filing requirements are becoming more frequent when it comes to VAT. Since July, Spanish businesses have been required to send invoices to the tax office immediately after any transaction. In Russia, millions of cash registers have been automatically sending data to the authorities since February.

Governments are also seeking new ways to respond to the growth of the gig economy — for example, by forcing platforms to help collect tax from workers and users.

But governments, including the UK’s, want much more. The British authorities are pushing businesses to put more information in the public domain, in the hope of enlisting public pressure to improve compliance and collection. For example, the UK now requires its largest companies to disclose their tax strategy as a means of increasing compliance.

Public opinion has fuelled demands for more information about global business transactions. Financial services institutions are under pressure to help stop tax evasion and there is growing condemnation of the use of offshore tax havens by campaigners.

In a recent initiative by the G20 group of leading economies, banks in more than 100 nations must now collect data on foreign account holders and hand it over to the tax authorities in the holder’s home country so that it can be shared with other governments. The first tranche of information under the system, known as the Common Reporting Standard, was transferred in September.

In another example of this trend, multinationals now need to tell governments where they earn their profits and pay their taxes. This development, introduced by the G20 as part of a global crackdown on tax avoidance, will force businesses to make their first transfer of data this year. The information will be used to give tax authorities a better idea of where to target their audits. Fifty countries have implemented the rules and a further 21 are set to follow.

Some of this information is destined to end up in the public domain. In the EU, banks and oil companies are required to provide detailed public information about their tax payments. In July, lawmakers voted to extend the requirement to all multinationals operating in the EU.

In response to public pressure, many companies are putting large amounts of detailed information about their tax affairs in the public domain voluntarily, although left-leaning politicians, including those in Britain’s Labour party, want even more public disclosure.

Public debt is expected to decline, though only slowly. According to projections by the International Monetary Fund, it will remain higher than 100 per cent of gross domestic product for advanced economies until 2022 — and probably well beyond that. Tax authorities will always want to collect every penny they can, and companies will be at the forefront of their efforts. Vanessa Houlder