On the taxing of migrants’ earnings while retaining a migrant workforce

Abstract

We study policies that are aimed at retaining a migrant workforce in a Gulf State while introducing a tax on migrant earnings. We single out Qatar as a case study. We consider two types of migrants: target migrants, and non-target migrants. If migrants are target migrants, we show that in order to neutralize the effect of a tax on their earnings, Qatar needs to extend the length of time migrants are allowed to stay. Such a scheme can work even when the migrants experience utility loss from staying longer in Qatar. If migrants are non-target migrants, we show that implementation of a lottery scheme in which the prizes are life-long residency in Qatar can “compensate” for the imposition of the tax. In both cases, we present numerical examples that illustrate the magnitudes involved.