If the rich leave the country, we will all miss them

Airport departure gate © Getty Images
The non-doms could leave for more attractive tax regimes

Say goodbye to the non-doms. These are a smallish group of people who live in the UK but consider their domicile to be elsewhere (ie they have an allegiance to another country and are likely to both retire and be buried in that country).

We don’t tax them in quite the same way as we do UK-domiciled people. We give them a choice: they either pay tax on their worldwide income in the UK (as the rest of us do) or they pay an annual fee (£30,000, rising to £90,000, depending on how many years they have been resident in the UK) and then tax only on income or capital earned in the UK or remitted to the UK.

That’s a regime that sounds generous (if you have a lot of capital offshore, there are pretty good tax advantages) but which also brings in a lot of cash for the UK – in 2015 the tax revenue from the 116,000 people in the UK claiming non-dom status added up to a whopping £6.5bn. That’s enough to pay for all the DUP demands with some to spare.

However there is trouble ahead. The UK’s non-doms have been unsettled by the rising costs of their status (the annual fee was only introduced under George Osborne); by the suggestion that there is more to come (a new crackdown to make very long-standing non-doms pay tax on their foreign earnings was supposed to have been in the last Finance Bill); and by the uncertainty surrounding the next moves (the new crackdown was cancelled after the election and it isn’t certain what will happen next).

At the same time other countries are stepping up their attract-the-rich game. Italy has a new regime under which non-doms can pay a flat fee of €100,000 a year and nothing else, for example. It’s pretty attractive looking, so much so that according to the Mail on Sunday, Italy – which introduced a rival non-dom scheme last year – has bagged its first big Brit.

You may think this is fine. If you are exercised about wealth inequality you may figure that the sooner this lot are gone the better. But before you feel too smug it is worth remembering the amount of money we take from our non-doms: their leaving will take away an irritating symbol of wealth inequality but it will make the UK state rather poorer as it does. We will miss the rich when they are gone.

  • C Narbeth

    On the one hand 6.5bn is an awful lot of tax revenue, on the other it isn’t an awful lot more than the 116,000 people x their 30,000 ‘non-dom’ fee.
    Even if 1/3rd of them leave we’ll still get 6.75bn from the remaining 75,000 paying 90k ‘non-dom’ fee even if they shelter ALL of their income, capital gains etc.
    …. and even if the whole lot left, we could much more simply recoup this tax revenue tenfold by introducing a 1% property tax on ALL mansions over 1mm.
    Not only would this raise substantial revenue in a manner which cannot be avoided but it would also place a dampener on the irrational London property market which would ultimately benefit those who want to live and work in the City

  • AlexH

    I think we are sending the wrong messages – “we don’t want the super rich in the UK”. Even if they own properties and spend a few days a year in the UK and are happy to pay £30k for the privilege. It’s not just the non-doms but the army of people that they employee directly and indirectly that will loose out. The long term damage is the message that the UK is sending to anyone that happens to do well – watch it we will make it so uncomfortable for you that an offer to reside in Europe would be more attractive. I am sure Pres. Macron will welcome them all with open arms and suitable tax incentives. Maybe there will be another U turn.

  • Emailonly

    Modern Monetary Theory would suggest that the amount of tax gleaned from these non-doms is irrelevant since taxation is just a means of regulating demand and isn’t needed to raise government spending money.
    Anyway, you’ve covered the super-rich before, and I think you wrote that they don’t spend very much. so aren’t as helpful as they seem.

  • Kevin Hoque

    Monaco is filled with super rich. I wonder if ordinary people there have better lives because of it? Do they have better housing, education, health care, standard of living? They ought to if the arguments in this article are correct…

    Any ideas?