Ukrainian refugees will cost Europe at least 30 billion euros. Why is it a good investment?

Olena and Kyrylo are Ukrainian refugees. The family has three children, the eldest son is 6 years old, the youngest daughter is just one year old. Olena is a designer and Kyrylo is a programmer in a large international company. They left Kyiv on 24 February and gained temporary protection status in Liechtenstein. As early as in June a russian missile hit their Kyiv apartment, destroying the ceiling and a wall. The only thing the government has done by now was clearing the building from the missile scrap by the Emergencies workers. There is no certainty on when their dwelling is going to be reconstructed. Residents of the house are forced to hire a barrister at their own cost to represent their interests before Kyiv authorities. As of now, the EU is the only refuge for the Olena and Kyrylo family. They are among millions of Ukrainian refugees who rescue themselves from the war abroad. 

Over 12 million people have left Ukraine since 24 February, fleeing from russian aggression. 7 million of them registered in Europe, received temporary protection status in the EU states. Last week the International Monetary Fund published an analytical research on policies to support Ukrainian refugees in Europe.

The most hospitable Eurozone countries, hosting most people, according to the report, turned out to be Poland (1.35 million people) and Germany (970,000). But if counted in the country’s population percentage, maximal hospitality was shown by Czechia (4% of the country’s population is the number of Ukrainians who received refuge), Estonia (3.8%), Poland (3.6%), and Moldova (3.5%).

More than 3.9 million Ukrainians got temporary protection status or similar statuses in the Eurozone. Hence, Poland has issued 1.35 million ID cards, Czechia, over 423,00, Italy, 153,900, Spain, 139,000. 90% of refugees are women with children, 22% to 44% of refugees are children.

Mind examined how much such hospitality costs to Europe, how it affects the global economy and whether or not everyone among Ukrainians is ready to go back to the motherland and when.

How considerable is the support of Ukrainians by Europe?

According to preliminary calculations, the cost of Ukrainian refugee “incursion” to the EU may vary from 30 to 37 billion euros per year, or 0.19 to 0.23% GNP of the European Union. Though, a considerable part of refugees live in rented flats paid by themselves or by charity organisations from Ukraine and other countries.

Some refugees have jobs in Ukraine or even in the EU. True, the IMF report does not specify the percentage of people in question. Olena’s husband Kyrylo, for instance, continues working as a programmer for a large international company.

The May 2022 research by the Organisation of Economic Cooperation and Development revealed that the refugee allocation cost in major European countries is 11,577 euros on average per year. Exemptions for transportation, health care, education, learning local language and other services were not included in this amount.

For example, visiting language courses is obligatory for those receiving government welfare benefits in Germany. This will help the German authorities to integrate skilled professionals from Ukraine to the German labour market. Hungary has retained its fare benefits longer than other EU countries – while most Eurozone countries cancelled free fare for Ukrainians back in summer, the whole public transportation in Budapest and a portion of trains running the country are still free under Ukraine passports till the end of 2022.

According to the IMF, the European Commission paid 3.5 billion euros to member states until late April 2022 in order to support them in managing the inflow of people fleeing the war in Ukraine. Among the major recipients are Poland (562 million euros), Italy (452 million euros), and Romania (450 million euros).

Where may a resettler find a job?

“We would like to make the integration process for Ukrainians less bureaucratic and more humane. For instance, Ukrainians want to work since the very first day after arrival, but there are only offers mostly in low-skilled labour areas or IT. At the same time, there is a critical lack of Ukrainian- or Russian-speakers at register centres and social organisations. But nobody recruits Ukrainians who speak English and German to serve as interpreters, most interpreters are volunteers,” says Inna Zviagintseva, financial analyst living in Austria now.

Though, there are cases when Ukrainians fina jobs similar to the one they had at home. For example, Liliya Sribna from the National Bank of Ukraine press service has been working now at the European Central Bank press service. Financier Olena Domuz has a banking job in Bulgaria.  

What is the profit of the receiving party?

“While initially refugees are fiscal burdens, they become net contributors after 8 to 16 years,” reads the IMF research, citing scientists Hennessey and Hagen-Zanker’s works. Advantages of refugee integration policy are thought to prevail over short-term expenditures on their support at first stages.

One specific matter are IT-companies from Ukraine, a part of which evacuated their employees nearly in a body to Europe. “IT guys are anxious that they may be taxed heavily in their countries of residence, as long as they have moved their ‘basic interest’ there and have been living there for more than half a year. Today many taxation agencies of the EU start to publish explanations that this is an extraordinary situation and there is not going to be any additional taxation,” explains Denys Kuznetsov, Head of the DTS Company.  

In his words, in future, IT companies will try to keep Ukrainian registration where they pay 2–5% of their turnover, or will choose those EU countries that have more comfortable taxation for them.

Mind wrote earlier that some countries decided to make advances to refugees on tax residency. The Polish tax service will not recognize Ukrainians as Polish tax residents until the end of the war, except for cases when a Ukrainian desires to become a Polish tax resident on his own. The tax service of Ireland made a decision that employees of Ukrainian companies that live in Ireland and work remotely will not become tax residents of Ireland.

So far the Ukraine government consults and negotiates with countries that provide temporary asylum for Ukrainians. But the corresponding modifications have not been ratified at the legislative level yet.

Refugees or hostages?

According to her, this figure includes Ukrainians that crossed the international border between Ukraine and the rf in accordance with reports from russia. Receiving, recording and general responding in the territory of russia are done by national agencies. UNHCR has a small office in moscow, but no continuous or regular presence on the frontier or in regions.

International relations expert Maksym Kukhar reminds that major kinds of human rights violations in russia and lands under its control are “far-fetched criminal prosecutions with the purpose of extortion; conscription to the rf military and sending to battle-front in Ukraine, criminal prosecutions for political opinions and public stance.” Moreover, mass media reported over 2000 orphans and children separated from their parents and moved from Ukraine under compulsion are prepared for adoption by russians.

What should be done for Ukrainian to return home?

“Our house was completely disconnected from all communications, and storeys hit by russian missiles are going to be sawn off. Even people whose flats were not affected were told to move their belongings to other places. There is no aid from the government with moving these items or finding a storage place for them. Our neighbours’ apartment was barely damaged, but it is also going to be sawn off. Nobody is going to compensate for the repair costs, though this is huge money,” laments Olena, a Kyivite. And this is not a single case. A similar situation is with Severodonetsk townsmen.

Analyst Daniil Monin says that 7 million refugees that had left Ukraine crumbled the consumption level in the country by about 25%. At the same time, the volume of remittance to Ukraine remains now at the 2021 level. This can support consumption activity to some extent, but the fall of demand cannot be eluded. “Only economic growth and development prospects could compensate for fiscal losses. Then the return of refugees may be expected,” says Mr. Monin. 

And everything so far goes vice versa. People flee not only the war, but also the poverty. Natalia from Dnipro city, for example, has a pension of about 2000 UAH. “It’s impossible to live on such money. While the Jewish community in Hungary and the Federation of Jewish Communities of Ukraine help me with dwelling and nourishment in Hungary,” says Nataliya.

“Weekly departure of 100,000–150,000 Ukrainians is a disaster for the country. Thus the following scenario is possible, when these families will stay after the war in Europe, the US, Canada, and Turkey. These countries introduce tax preferences. And our authorities talk about increasing taxation even during the war. The 25% interest rate by the National Bank made business development loans inaccessible. There is not any competitive advantage for attracting western companies. For them to arise, a radical tax reform is necessary”, Monin concludes.