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| Osborne accuses Labour of 'tinkering around the edges' over non-doms | Osborne accuses Labour of 'tinkering around the edges' over non-doms |
| (35 minutes later) | |
| Britain’s general election campaign was finally sparked into life after Ed Miliband promised to abolish the non-domicile rule that allows many of Britain’s richest permanent residents to avoid paying tax in the UK on their worldwide income. | Britain’s general election campaign was finally sparked into life after Ed Miliband promised to abolish the non-domicile rule that allows many of Britain’s richest permanent residents to avoid paying tax in the UK on their worldwide income. |
| In the biggest tax row of the election so far, George Osborne accused Labour of “tinkering around the edges” as the two coalition parties declined to follow Miliband’s lead in moving to end a colonial-era symbol of inequity in the tax system. | In the biggest tax row of the election so far, George Osborne accused Labour of “tinkering around the edges” as the two coalition parties declined to follow Miliband’s lead in moving to end a colonial-era symbol of inequity in the tax system. |
| The two coalition parties criticised Labour after it said that the non-dom rule, introduced by William Pitt the Younger in the late 18th century, has been wide open to abuse and offends the moral basis of taxation. Everyone who has made the UK their permanent home should pay full UK tax on all their income and gains, Miliband will argue. | The two coalition parties criticised Labour after it said that the non-dom rule, introduced by William Pitt the Younger in the late 18th century, has been wide open to abuse and offends the moral basis of taxation. Everyone who has made the UK their permanent home should pay full UK tax on all their income and gains, Miliband will argue. |
| In a speech in Warwick on Wednesday, the Labour leader is expected to say that the non-dom rule, believed to be used by more than 110,000 wealthy people in a system unique to the UK, is born of a discredited belief that “anything goes for those at the top and that what is good for the rich is always good for Britain”. | In a speech in Warwick on Wednesday, the Labour leader is expected to say that the non-dom rule, believed to be used by more than 110,000 wealthy people in a system unique to the UK, is born of a discredited belief that “anything goes for those at the top and that what is good for the rich is always good for Britain”. |
| Non-doms pay UK income tax and capital gains tax on their UK sources of income and gains, and whatever income generated overseas they choose to remit to the UK. By contrast, UK domiciles have to pay tax on all of their income and gains, wherever in the world they are made – Britain or overseas. | Non-doms pay UK income tax and capital gains tax on their UK sources of income and gains, and whatever income generated overseas they choose to remit to the UK. By contrast, UK domiciles have to pay tax on all of their income and gains, wherever in the world they are made – Britain or overseas. |
| The chancellor, who is conscious of poll findings that the Tories are seen as the party of the rich, realised overnight that he had to tread with care in response to a Labour plan to crack down on multi-millionaires. Osborne therefore moved to unpick the Labour announcement by saying that it is not in fact abolishing the non-dom rule on the grounds that the rule will remain in place for non-doms who stay in the UK for no more than two to three years. | The chancellor, who is conscious of poll findings that the Tories are seen as the party of the rich, realised overnight that he had to tread with care in response to a Labour plan to crack down on multi-millionaires. Osborne therefore moved to unpick the Labour announcement by saying that it is not in fact abolishing the non-dom rule on the grounds that the rule will remain in place for non-doms who stay in the UK for no more than two to three years. |
| “The small print of Labour’s policy makes clear that they are not actually abolishing non-dom status,” the chancellor said. “Either they are going to abolish non-dom status altogether which would cost our country hundreds of millions of pounds in lost tax revenues and lost investment – the reason they did nothing on this during 13 years in office. Or they are just tinkering around the edges and making small adjustments to the rules on how long people can be non-dom. | “The small print of Labour’s policy makes clear that they are not actually abolishing non-dom status,” the chancellor said. “Either they are going to abolish non-dom status altogether which would cost our country hundreds of millions of pounds in lost tax revenues and lost investment – the reason they did nothing on this during 13 years in office. Or they are just tinkering around the edges and making small adjustments to the rules on how long people can be non-dom. |
| “We’ve taken the right approach to this issue by raising more money from non-doms than any previous government. And we will raise £5bn a year in the next parliament by continuing to crack down on tax avoidance and evasion, including abuses of the non-dom rules.” | “We’ve taken the right approach to this issue by raising more money from non-doms than any previous government. And we will raise £5bn a year in the next parliament by continuing to crack down on tax avoidance and evasion, including abuses of the non-dom rules.” |
| Ed Balls, the shadow chancellor, clarified the Labour plans by outlining a three-stage process which would end the non-dom rule for people resident in the UK for more than two to three years. Balls said: | Ed Balls, the shadow chancellor, clarified the Labour plans by outlining a three-stage process which would end the non-dom rule for people resident in the UK for more than two to three years. Balls said: |
| • From April 2016 no new-doms will be allowed.• Existing non-doms will be given a short period to settle their affairs.• Labour will stress that foreigners in the UK for a genuinely temporary, short period would be able to retain non-dom status. In future, non-doms would be allowed to retain their status if they live in the UK for a short period. Balls said this would be for the equivalent length of a normal postgraduate university degree of two to three years. | • From April 2016 no new-doms will be allowed.• Existing non-doms will be given a short period to settle their affairs.• Labour will stress that foreigners in the UK for a genuinely temporary, short period would be able to retain non-dom status. In future, non-doms would be allowed to retain their status if they live in the UK for a short period. Balls said this would be for the equivalent length of a normal postgraduate university degree of two to three years. |
| The shadow chancellor said Labour was no confused about the policy. He told BBC Radio 4’s Today programme: “What we are talking about here is people who have lived here all their lives. People who can claim even though they are in their 50s and they have got kids living in our country – that somehow they are not a domicile because their father was born in Brazil. That is ridiculous and that is what has got to change. | The shadow chancellor said Labour was no confused about the policy. He told BBC Radio 4’s Today programme: “What we are talking about here is people who have lived here all their lives. People who can claim even though they are in their 50s and they have got kids living in our country – that somehow they are not a domicile because their father was born in Brazil. That is ridiculous and that is what has got to change. |
| “It has become clear in the last few years this is being abused more than people thought before. That is why are going to change things because we need to get the deficit down in a fair way and a balanced way.” | “It has become clear in the last few years this is being abused more than people thought before. That is why are going to change things because we need to get the deficit down in a fair way and a balanced way.” |
| Danny Alexander, the Liberal Democrat chief secretary to the Treasury, meanwhile pledged to introduce a crackdown on non-doms in the next parliament to generate an extra £130m. | Danny Alexander, the Liberal Democrat chief secretary to the Treasury, meanwhile pledged to introduce a crackdown on non-doms in the next parliament to generate an extra £130m. |
| He followed Osborne’s example in stopping short of pledging to abolish the non-dom rule and saying that the Lib Dems would push for a greater crack down on abuse. He said: “In the next parliament we want to go further by radically reforming the rules and significantly increasing the charges for non-doms to secure an additional £130m for the public purse. The key tests are what maximises revenue for the exchequer and best supports our economic recovery.” | He followed Osborne’s example in stopping short of pledging to abolish the non-dom rule and saying that the Lib Dems would push for a greater crack down on abuse. He said: “In the next parliament we want to go further by radically reforming the rules and significantly increasing the charges for non-doms to secure an additional £130m for the public purse. The key tests are what maximises revenue for the exchequer and best supports our economic recovery.” |
| The chancellor has himself altered the non-dom system by increasing the annual fees on those who are granted non-dom status, but Labour claims that the rules are shot through with anomalies. Labour says those who have lived abroad and return to the UK can claim non-dom status simply on the basis of nothing more than a burial plot, a foreign bank account or a father born abroad – and even an overseas newspaper subscription. | The chancellor has himself altered the non-dom system by increasing the annual fees on those who are granted non-dom status, but Labour claims that the rules are shot through with anomalies. Labour says those who have lived abroad and return to the UK can claim non-dom status simply on the basis of nothing more than a burial plot, a foreign bank account or a father born abroad – and even an overseas newspaper subscription. |
| The non-dom anomaly was recently highlighted by the case of HSBC’s chief executive Stuart Gulliver – first reported in the Guardian – who is able to claim non-dom status because he previously worked in Hong Kong, even though he was born and raised in Britain, has worked in the UK for past 12 years and sends his children to school in the UK. | The non-dom anomaly was recently highlighted by the case of HSBC’s chief executive Stuart Gulliver – first reported in the Guardian – who is able to claim non-dom status because he previously worked in Hong Kong, even though he was born and raised in Britain, has worked in the UK for past 12 years and sends his children to school in the UK. |
| Labour said the change would raise hundreds of millions of pounds, but was careful not to give a precise figure, partly because the numbers taking advantage of the rule, and the value to them, is a matter of dispute. | Labour said the change would raise hundreds of millions of pounds, but was careful not to give a precise figure, partly because the numbers taking advantage of the rule, and the value to them, is a matter of dispute. |
| Related: The day I tried to become a non-dom – a scheme worthy of an Ealing comedy | Ian Jack | |
| Critics will claim that abolition of non-dom status, taken with Labour’s plans for a mansion tax and a 50p top rate of tax, will lead to an exodus of the super-rich from London to other European capitals, Switzerland or the Far East. It is argued that non-doms still pay huge sums to the Treasury, even as much as £132,000 per person per year on average, and that abolition will simply lead to a long-term fall in revenue. | Critics will claim that abolition of non-dom status, taken with Labour’s plans for a mansion tax and a 50p top rate of tax, will lead to an exodus of the super-rich from London to other European capitals, Switzerland or the Far East. It is argued that non-doms still pay huge sums to the Treasury, even as much as £132,000 per person per year on average, and that abolition will simply lead to a long-term fall in revenue. |
| But Miliband will insist that the long-standing non-dom rule has become a symbol of the scandal of tax avoidance, and he would abolish it from April 2016. He will say: “There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain like you and me, but aren’t required to pay taxes like you and me because they take advantage of what has become an increasingly arcane 200-year-old loophole. | But Miliband will insist that the long-standing non-dom rule has become a symbol of the scandal of tax avoidance, and he would abolish it from April 2016. He will say: “There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain like you and me, but aren’t required to pay taxes like you and me because they take advantage of what has become an increasingly arcane 200-year-old loophole. |
| “There are now 116,000 non-doms, costing hundreds of millions of pounds to our country. It can no longer be justified, and it makes Britain an offshore tax haven for a few.” | “There are now 116,000 non-doms, costing hundreds of millions of pounds to our country. It can no longer be justified, and it makes Britain an offshore tax haven for a few.” |
| Prominent non-doms | |
| Stuart Gulliver, the chief executive of HSBC, claims non-dom status due to his long period living in Hong Kong, to which he says he intends to return. Gulliver was questioned by the Commons public accounts committee about his non-dom status and other aspects of his financial affairs. He told MPs he pays full UK tax on all of his worldwide income. | |
| James Caan, the investor and former star of BBC show Dragons’ Den, who was born in Pakistan, had a row with fellow dragon Duncan Bannatyne over his non-dom status. In public remarks in 2010, Bannatyne said Caan’s tax status was “unfair”. | |
| Lord Rothermere, the proprietor of the Daily Mail, claims hereditary non-dom status through his family’s French ancestry.Zac Goldsmith, the Conservative MP, was criticised for his hereditary non-dom status during his first efforts to become an MP. Goldsmith eventually relinquished his non-dom status before running for parliament in 2010. | |
| The architect Norman Foster relinquished his seat in the House of Lords in 2010 rather than shed his non-dom status as rules in the House changed to disallow peers from being non-doms.The clothing magnate Richard Caring, named as an offshore account holder and secret stakeholder in Philip Green’s BHS chain in the HSBC Files, claims non-dom status through his father’s American citizenship. |