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If the rich leave the country, we will all miss them
Many people are not fond of rich people domiciled elsewhere for tax purposes. But they still pay a lot in tax, and if they go, the country will miss them, says Merryn Somerset Webb.
The non-doms could leave for more attractive tax regimes
(Image credit: 2012 Bloomberg)
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.
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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.
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