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Digitalization, Immigration and the Welfare State

Mårten Blix

The Swedish welfare state finds itself in the middle of two major upheavals: The impact of technology and immigration. Having taken in more refugees per capita than most other countries, the pillars of the welfare state are being shaken. Digital technologies are set to strengthen already existing trends towards job and wage polarization. This book explores how these trends are more pronounced due to the rigidity of the labor market and the comprehensiveness of tax-financed welfare services.
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Chapter 5: Fiscal pressures from digitalization and immigration

Mårten Blix


It’s just wrong. (Steven Askew, a local baker in Crickhowell, Wales, on paying more income tax than some multi-billion dollar corporations)1

The meeting was on corporate taxation and the place was the OECD, the rich world’s think tank. There was extra security at the entrance to the meeting room, something I had never experienced even once during the many years of attending a variety of multilateral governmental work at the OECD.

Corporate taxation is a complex and sensitive area – pitting developing countries against the rich world, high tax countries against low tax countries – all amidst lobbying. The backdrop for modern economies is how to tax its companies and citizens to pay for public services and yet do as little harm as possible to incentives and economic growth. This challenge is especially strong for welfare states with large spending commitments in place and with populations that expect continued improvement in welfare services.

Corporate tax planning is, of course, not new. Multinational corporations have long been shopping for the best tax environment, otherwise known as tax arbitrage. The more global firms become, the larger the role of considering the tax environment as one of the factors in their choices of production. Expanding trade has made this increasingly important also for small and medium-sized firms. The more mobile the factors of production become, the stronger the reason also for small firms to find locations that favor their business from a tax and regulatory perspective.

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