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| The Tories must stamp on the leech of non-dom status – before Labour does | The Tories must stamp on the leech of non-dom status – before Labour does |
| (35 minutes later) | |
| The Tories should nip this one in the bud. George Osborne has been tougher than any chancellor on tax avoidance. He should agree to Labour’s proposal to end non-dom tax status forthwith. He can argue that all parties have been lax on these scams. All sides should now strive to clear the deck. | The Tories should nip this one in the bud. George Osborne has been tougher than any chancellor on tax avoidance. He should agree to Labour’s proposal to end non-dom tax status forthwith. He can argue that all parties have been lax on these scams. All sides should now strive to clear the deck. |
| This is not a left-right issue. It is about basic fairness. Labour introduced a fee of £30,000 on British residents wishing to claim “foreign domicile” for tax purposes, increased by the Tories to £90,000. There remain 116,000 residents who still do so. The Labour peer and former non-dom Lord Paul suggested to the BBC this morning that Osborne’s fee increase was a plot to favour very rich Tory donors at the expense of moderately rich Labour ones. That must be absurd, but it demonstrates the corruption now enveloping this murky frontier between tax dodges and party donors. | This is not a left-right issue. It is about basic fairness. Labour introduced a fee of £30,000 on British residents wishing to claim “foreign domicile” for tax purposes, increased by the Tories to £90,000. There remain 116,000 residents who still do so. The Labour peer and former non-dom Lord Paul suggested to the BBC this morning that Osborne’s fee increase was a plot to favour very rich Tory donors at the expense of moderately rich Labour ones. That must be absurd, but it demonstrates the corruption now enveloping this murky frontier between tax dodges and party donors. |
| Non-dom status is a fiscal archaism. In medieval England, you could buy a church burial site to gain a fast track to heaven. The trouble was that to benefit, you had to die first. In modern England, you can achieve fiscal heaven while still alive. Buy the sacred plot abroad and you get the benefit right away: “place of intended burial” is a key criterion for non-domicile tax status. | Non-dom status is a fiscal archaism. In medieval England, you could buy a church burial site to gain a fast track to heaven. The trouble was that to benefit, you had to die first. In modern England, you can achieve fiscal heaven while still alive. Buy the sacred plot abroad and you get the benefit right away: “place of intended burial” is a key criterion for non-domicile tax status. |
| New York, with a far more severe tax regime than we have, is not noticeably short of super-rich | |
| The tax relief was meant to encourage colonial enterprise by sons and daughters of empire; it now simply encourages the rich. Britain is one of the few developed countries where you can set up home but pay tax only on what you “remit” to a British bank account. Even if born in Britain to a foreign-domiciled father, you can shelter your entire inheritance overseas tax-free. | The tax relief was meant to encourage colonial enterprise by sons and daughters of empire; it now simply encourages the rich. Britain is one of the few developed countries where you can set up home but pay tax only on what you “remit” to a British bank account. Even if born in Britain to a foreign-domiciled father, you can shelter your entire inheritance overseas tax-free. |
| In most countries, including America, those who benefit from citizenship are expected to pay the same taxes as everyone else. Only in Britain is that not the case. If non-dom, you need pay tax only on the money you bring into the country and spend here. Britain is a classic tax haven. | In most countries, including America, those who benefit from citizenship are expected to pay the same taxes as everyone else. Only in Britain is that not the case. If non-dom, you need pay tax only on the money you bring into the country and spend here. Britain is a classic tax haven. |
| The consequent attraction to London of the very rich is much cited by non-dom apologists. It is said to be “good for Britain”. This is wholly unproved. It has certainly led to price inflation for London houses, schools, hospitals and football clubs, but how much has trickled down into the economy is moot. New York, with a far more severe tax regime, is not noticeably short of super-rich. | The consequent attraction to London of the very rich is much cited by non-dom apologists. It is said to be “good for Britain”. This is wholly unproved. It has certainly led to price inflation for London houses, schools, hospitals and football clubs, but how much has trickled down into the economy is moot. New York, with a far more severe tax regime, is not noticeably short of super-rich. |
| How this scam has survived so long is a mystery. Labour’s Ed Balls got in a mess this morning when asked (on the BBC) why he had not abolished it when he was himself at the Treasury. He said, obscurely, the issue was “not a priority”. It was now needed to “cut the deficit”, while also being “a matter of principle”, The truth is that Balls, like his predecessors, lacked the guts to face down the lobbyists. | How this scam has survived so long is a mystery. Labour’s Ed Balls got in a mess this morning when asked (on the BBC) why he had not abolished it when he was himself at the Treasury. He said, obscurely, the issue was “not a priority”. It was now needed to “cut the deficit”, while also being “a matter of principle”, The truth is that Balls, like his predecessors, lacked the guts to face down the lobbyists. |
| Pressure on successive Treasury ministers has long come from a potent coalition of party donors, bankers, accountancy firms and City politicians – a lobby stashed with non-doms. Lord Paul, a Labour donor, rather gave the game away when he said he had dropped his non-dom status only when told he could not also be a lord. It must have been an expensive peerage. | Pressure on successive Treasury ministers has long come from a potent coalition of party donors, bankers, accountancy firms and City politicians – a lobby stashed with non-doms. Lord Paul, a Labour donor, rather gave the game away when he said he had dropped his non-dom status only when told he could not also be a lord. It must have been an expensive peerage. |
| Non-dom status is to fiscal policy what leeches once were to medicine, a lingering anachronism embedded in professional custom and practice, and thus hard to change. I once used an excellent Inland Revenue tax advice service, based in Soho. An official would fill in your form for free. He listed allowances and deductions beyond my imaginings, and was especially keen to know if I had foreign connections. He was adamant that I should pay only what was legally required. I imagine, like many former HMRC officials, this splendid official now runs a lucrative service somewhere in Geneva. | |
| Britain’s non-dom rules may cost the Treasury £1bn a year. But tax evasion in all its forms, including the black economy, has been estimated to cost the British exchequer as much as £70bn annually. Even if this is an exaggeration, a huge section of the public realm is clearly crying out for reform. | Britain’s non-dom rules may cost the Treasury £1bn a year. But tax evasion in all its forms, including the black economy, has been estimated to cost the British exchequer as much as £70bn annually. Even if this is an exaggeration, a huge section of the public realm is clearly crying out for reform. |
| Osborne himself has called evasion “morally repugnant ... stealing from law-abiding people, who face higher taxes to make good the lost revenue.” Tax avoidance through overseas shelters is evasion legitimised by the state. Hence the growth of such euphemisms as “aggressive avoidance”, “tax planning” and “legitimate relocation”. There is no need to condemn those who use these methods. The need is to stamp them out. They are wrong. | Osborne himself has called evasion “morally repugnant ... stealing from law-abiding people, who face higher taxes to make good the lost revenue.” Tax avoidance through overseas shelters is evasion legitimised by the state. Hence the growth of such euphemisms as “aggressive avoidance”, “tax planning” and “legitimate relocation”. There is no need to condemn those who use these methods. The need is to stamp them out. They are wrong. |
| Miliband – and, hopefully, Osborne – should not stop at non-doms. If Miliband means what he and Balls say, they should promise a commission to look at tax policy across the board. | Miliband – and, hopefully, Osborne – should not stop at non-doms. If Miliband means what he and Balls say, they should promise a commission to look at tax policy across the board. |
| The big money is not in personal tax dodges but in the corporate sector, not least in global operations such as Google, Apple, Amazon and Facebook. What will Miliband (and his new Scottish allies) do about corporate taxation? Will Scotland indulge in the same deals as Ireland to attract company letterboxes? There is no doubt that company taxation in a global marketplace is tough. That is what tax experts are for. Big firms may threaten to “take our headquarters elsewhere”; they cannot take their customers and their employees. | The big money is not in personal tax dodges but in the corporate sector, not least in global operations such as Google, Apple, Amazon and Facebook. What will Miliband (and his new Scottish allies) do about corporate taxation? Will Scotland indulge in the same deals as Ireland to attract company letterboxes? There is no doubt that company taxation in a global marketplace is tough. That is what tax experts are for. Big firms may threaten to “take our headquarters elsewhere”; they cannot take their customers and their employees. |
| The worst culprit is Europe. That tax shelters exist within its borders is an offence against the principle of economic union. European states must bear the burden of open borders, mass migration and shared welfare, for the good of the continent as a whole. Yet sandwiched between these states are tax havens bleeding them of cash for no other reason than to avoid paying a fair share of that welfare burden. | The worst culprit is Europe. That tax shelters exist within its borders is an offence against the principle of economic union. European states must bear the burden of open borders, mass migration and shared welfare, for the good of the continent as a whole. Yet sandwiched between these states are tax havens bleeding them of cash for no other reason than to avoid paying a fair share of that welfare burden. |
| The continued indulgence of such havens as Jersey, Monaco, Luxembourg and Switzerland, not to mention Atlantic and Caribbean islands laughably called British protectorates, should never be allowed. There is no justification for what amounts to sovereign theft from bigger neighbours. Of course the rich can “go elsewhere”. At least they should be forced to go out of Europe. | The continued indulgence of such havens as Jersey, Monaco, Luxembourg and Switzerland, not to mention Atlantic and Caribbean islands laughably called British protectorates, should never be allowed. There is no justification for what amounts to sovereign theft from bigger neighbours. Of course the rich can “go elsewhere”. At least they should be forced to go out of Europe. |
| Leona Helmsley famously remarked that “only the little people pay taxes.” Non-dom status is for big people, but so are myriad other forms of evasion and avoidance. Cut them out and income tax could fall, and half the NHS budget be saved. Why is it taking so long? | Leona Helmsley famously remarked that “only the little people pay taxes.” Non-dom status is for big people, but so are myriad other forms of evasion and avoidance. Cut them out and income tax could fall, and half the NHS budget be saved. Why is it taking so long? |