UK should prepare for wealth exodus after next election
Wealthy Britons and UK-based foreigners are likely to flee Britain and take their funds with them after the next general election as high tax Britain is set to become even higher tax Britain.
Higher tax Britain? Really? Yes, it seems so.
A leading think tank has warned that tax hikes of up to £9bn, which equates to 2p on the basic rate of income tax, are likely to be imposed after the next election to plug the huge hole that will be left in the government’s finances following the spending cuts scheduled for 2015 that were announced in George Osborne’s budget.
The astute number crunchers at the Institute for Fiscal Studies have shown that the government will have little alternative but to borrow more or increase taxes to pay for the Chancellor’s budget. As this is after an election, a time when MPs can more afford to take unpopular measures, it is highly probable that the newgovernment would opt for the former – taxes would be hiked up.
As such, Wednesday’s budget represents a little bit of pain today for a whole lot more tomorrow.
A tax hike could be the tipping point for many high-net-worth and ultra-high-net-worth individuals, who are the most mobile in society due to their abundant resources.
Whilst proponents of tax hikes try to dismiss any notion of a global phenomenon of tax migration, both current examples and history prove just the opposite. It’s clear: when high-net-worth individuals are taxed to perceived excessive levels, they simply move – because they can. They are, in effect, taxed out.
Clearly, such capital flight would be detrimental to the UK. HM Revenue and Customs estimate that Britain’s top 275,000 earners contributed more than £41.4bn in tax over the last financial year, which equals 25.7 per cent of the UK’s total income tax bill. This is revenue the country simply cannot afford to lose.
If the UK is serious about boosting its coffers, it should be becoming more tax competitive, to attract high-net-worth individuals and job-creating firms, not less. Indeed, as David Cameron has previously said, the red-carpet should be rolled out for them.
Nigel Green deVere Group
blog written 23rd March