Tax incentives to create new high-skilled jobs – a trigger for sustainable economic growth in European societies
Over the past 60 years the European Union (EU) has become ‘the world’s greatest convergence machine’. However, neither that machine, nor the actions undertaken at the European level, are sufficient to create high-skilled and high-paid jobs in a sustainable way in each Member State of the EU, an issue which is hard to reconcile with the idea of a Social Europe. This situation, together with European freedom of movement and competition between jurisdictions to attract high-skilled employees, creates a serious risk to the EU’s sustainable development and the level of innovativeness in these Member States, which are particularly vulnerable to the outflow of qualified labour. Given the inefficient actions of the EU, each Member State has to implement its own solutions to attract foreign high-tech investment and to increase the level of innovation in the state’s economy. These solutions are present worldwide in the scope of tax law. In this chapter the author explains the significance of innovation for a state’s economy, discusses the global competition among jurisdictions to attract high-skilled human capital (also described as a form of the ‘prisoner’s dilemma’), and analyses tax measures adopted across the world to achieve that goal, including those aimed at avoiding focusing on cheap labour, which could be the most significant barrier to the development of innovation-based investment. These measures include tax refunds for entrepreneurs creating jobs for high-skilled personnel, incentives for foreigners working within a state and maintaining a foreign residence (including high-skilled and highly paid workers), tax deductions for foreign social security payments, exemptions for income received by foreign high-skilled employees, and tax relief for housing and travelling costs. Even in Germany, which had been quite conservative in the field of new incentives for industries requiring high-skilled human capital, the Government clearly stated that tax incentives for R&D will be introduced. Furthermore, the author presents data concerning attracting high-tech investment and indicates that it is not labour costs, but access to qualified labour that is the most important factor for entrepreneurs deciding on where to locate high-tech investments. Therefore, the state of higher education and cooperation between scientific centres and businesses have special significance and should be at the centre of actions undertaken at the national level to increase states’ innovativeness. The conclusions have taken into account the experience of Poland, which is particularly vulnerable to the outflow of high-skilled labour.