Ed Miliband’s plans to scrap non-dom tax status could have shattering implications
Labour’s plans to abolish non-domicile tax status, should they be elected next month, is as I have been quoted as saying in the media, reckless and irresponsible.
The opposition leader, Ed Miliband, announced the plans in a speech earlier this week, which to my mind is a wild, imprudent attempt to win votes through the politics of envy.
This move would result in some of Britain’s wealthiest, most successful non-dom taxpayers leaving the country. Indeed, prominent UK tax barristers have warned as many as 30,000 of these high net worth individuals could be prompted to exit should these plans come into effect in a Labour government.
As it stands now, prosperous foreigners can apply for non-dom status in order to circumvent tax on earnings made overseas and capital gains. Non-dom status can also be inherited, hence people born and raised in the UK can still benefit. Labour plans to put an end to this, and give UK-based non-doms a two-year period of transition, following which they will be required to pay tax on all earnings after “two to three years.”
Although Mr Miliband claims scrapping these rules will raise “hundreds of millions” and it is the “right thing to do”, Britain cannot afford to lose such a significant addition to the economy with such a high risk of a negative tax yield. Particularly when non-doms pay some £8.2 billion in tax – which is equivalent to a 10 million-strong low income workforce.
Wealthy non-doms have the resources to be able to relocate easily, and taking into account how determined every country is to attract these job-creating individuals to enhance their economies, these plans proposed by Labour are somewhat incongruous.
It is crucial that the UK remains competitive in terms of the global economy, in order to tempt the wealthiest, most talented people. However this proposal would diminish Britain’s ‘pull factors’, effectively repelling these high earners, therefore resulting in lower tax revenues, to the detriment of economic growth.
I suggest that rather than persecuting non-doms, the optimum course of action would be to reduce the tax burden for all over a period of time. This would ensure the UK stays competitive on an international scale, without allowing a specific set of individuals extra privileges.
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