We’ve been wondering for ages how many rich people have really been driven out of the UK by the 50% marginal tax rate. We still don’t really know. But there are a few hints here: British bankers head to Switzerland.
Turns out that according to the Swiss Federal Migration Office, 383 British citizens working in banking and financial services moved to Switzerland in 2010. That’s up 28%. Look at a broader sector – banking insurance and consulting – and the number is 1379.
Up 29%. Matthaeus Den Otter of the Swiss Funds Association seems to think these numbers make sense. He told Channel 4 that here has been a steady influx of skilled workers. We estimate that some 20 to 25 UK hedge funds have set up offices in Switzerland over the past year, and the banks will have sent over some specialised staff as well.”
And this isn’t just about the fact that people like to live in Switzerland – non British migration to Switzerland in the same sectors is up only 14%. So how much is this costing us? If anyone can come up with exact numbers I’d be very grateful to get them, but let’s assume for starters that total British banker migration to Switzerland is about 300 people. Then let’s assume they have annual earnings of about £400,000 each (this is a very very low estimate given that those who move are likely to be founders of big funds and so on). An earned income of £400,000 would generate tax of £177,000 in 2010/11 (£27,000 more than the year before). So a total of £53,100,000.
But of course that is just the start of it. There are also the non British bankers who have decided to leave London for Switzerland – these numbers don’t pick them up. There are the ones who have gone elsewhere – to Australia, to Hong Kong (one of my old fund manager friends packed his bags and headed there only a few months ago), to Shanghai and to the US.
And there is the fact that income tax is only one part of the tax the well off pay. There’s the 20% VAT on all their luxury goods (now bought in Geneva or duty free in Bangkok airport), the stamp duty on their houses and their investments, the council tax on their top-banded homes, their capital gains tax and of course the fuel duty on the tanks of their four by fours.
Add it all up and we have got to be well into the many hundreds of millions. The political consensus is that the 50% rate has to stay. I’ve written here before that I think it is a very bad idea. These numbers, scant as they still are, make me even more sure.