Ukrainian migrant remittances became reason for manipulations

Author : Oleksiy Kushch

Source : 112 Ukraine

The role of migrant workers in filling Ukraine's state budget is overvalued at least twice
17:00, 20 February 2019

112 Agency

The indicator of transfers of individuals is a very convenient tool for statistical manipulation. Ukraine’s National Bank (NBU) can clearly define only those transactions that pass through international payment systems and banks.

Related: Labor migrants to transfer $12,2 billion to Ukraine in 2019, - National Bank

Those who send the money in cash might be considered only conditionally, based on indirect assessment methods. Here no one can say for sure. Last year, the NBU has proudly reported a balance of payments surplus of $ 2.87 billion.

Naturally, no one specified that 1,81 billion from that amount were just bank "errors."

Something similar happened to the migrant remittances, which are an integral part of the structure of the balance of payments and are dispersed into two structural subsections: the balance of primary and secondary incomes.

The first item includes transfers of circular migration (staying abroad for less than a year), the second one includes payments of permanent migration (figures for Ukrainians working in other countries for more than a year). In total, these indicators are accumulated in one line, which, for simplicity, is called "individual transfers."

Related: Ukraine's Cabinet reduces immigration quota to 3,800 persons in 2019

It is for this indicator that the National Bank shows revenues to the country in the amount of 11 billion USD at the end of last year and predicts growth to 12 billion in 2019. Officials and experts are happy to voice the same figure, proving the beneficial effect of the Ukrainians abroad for the state budget.

This figure is a source of the statistical manipulations. For example, in 2017, statistics showed GDP growth of 2%. It turns out that the first place in terms of transfers to Ukraine does not belong to Poland, but the United States (17%), Israel (13%) comes second, Russia (9%) is the third, and Italy comes fourth (8%).

Poland only closes the top five countries (7%). In addition, the volume of interstate transfers amounted to 5.5 billion dollars. And then where is the same amount? And why, after all, is not Poland in the yellow jersey of the leader, but the USA and Israel?

Related: 11,000 illegal migrants from Ukraine annually come to Israel, - ambassador

In 2019, the volume of private transfers from abroad is likely to increase to 12 billion USD. Starting from 2015, this figure has steadily increased, rising from 7 billion to 9,3 in 2017. The net wages of workers in the mines, which is the difference between their earnings and costs in the host country, ranged from $ 4.1 billion in 2015 to 6.3 billion in 2019. Costs in the host country, including taxes paid there, ranged from 1,5 billion USD to 2.9, an increase of three billion over three years, with the most dramatic increase in this indicator recorded in 2017.

In 2018, this record would most likely be exceeded and the costs in the host country of our labor migrants will be about 3 billion USD.

Every year, Ukrainians pay about 0,5 billion USD as taxes to the other countries. If we compare this indicator with their total payroll, it turns out that the total fiscal burden will be 3 – 4%, while in Ukraine it exceeds 40% (income tax and fees), that is about 10 times higher.

And this analysis explains why people migrate from their country abroad. Ukraine would be forced either to close the borders or to somehow deal with the labor poverty in the next five years. And for this, the general level of taxation of the wage fund should be no more than 10%.

Related: Poland concerned about possible drain of Ukrainian migrant workers to Germany

Another interesting indicator is the number of remittances that are carried out by labor migrants staying abroad for more than a year. The transfers are much more modest than the overall figure (about $ 1 billion annually) here, and this amount has remained almost unchanged in recent years. In the first three quarters of 2018 it was 0,6 billion, that is, it might even decrease.

Permanent migrant workers gradually take away their families from Ukraine and are less and less financially connected with their homeland. Considering that, according to the IMF and the government, about 3 million Ukrainians constantly reside abroad, it turns out that, on average, one such migrant sends home about 300 USD a year.

Today, the figure of $ 11 billion in transfers from individuals includes several major components.

Related: Ukraine's National Bank predicts decrease of labor migration to Poland in 2019

These are labor migrants and their share in the general indicator is not more than 60%. Then come 150,000 – 200,000 Ukrainians working in IT sphere. The circuit design is quite simple here. our entrepreneurs, who reside in the USA and Israel (that is, in countries with the most developed innovative landscape and environment for start-ups), create their own companies there.

Approximately 70% of cash flows keep rolling in such centers registered in California or Tel Aviv. These companies create back-offices in Ukraine, whose task is to look for the smart heads, that is, to attract IT-specialists on a contract basis, involving them into co-working and creating the most comfortable working conditions.

It turns out that the role of migrant workers in filling the budget is overvalued at least twice.

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This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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