Wednesday sees Gordon Brown's final pre-budget report. He's been in the job for almost ten years now and yet one of his explicit 1997 pre-election promises has not been fulfilled: he has not abolished the domicile rules. These inherently racist rules allow a person not born in the UK, or who is the child of a father (in most cases) not born in the UK to claim that the UK is not their real home even if they have lived here most or all of their lives and that their true natural allegiance lies elsewhere. The proof of alternative allegiance that is required is remarkably low. The benefit of providing that proof is extraordinarily high. A person who is not domiciled in the UK only pays tax on their income and gains arising in the UK. Income and gains arising overseas are only taxed if brought to the UK. This can almost always be avoided.
The result is the extraordinarily low rates of income tax paid by the mega-wealthy that I referred to yesterday.
Another result is that London has attracted more foreign billionaires to live here than any other city in the world. It sickens me that I live in a country with a bias to the rich when there remains so much poverty that needs to be addressed. It sickens me that these laws make tax paying optional for the wealthy.
Chiltern's have according to AccountingWEB, suggested changes to the domicile rules are likely on Wednesday. I would like to think that true. If not, I'll be increasing my campaign against them. I do know that the Treasury's review of the issue is on-going. That is welcome. But will this be the day when this massive and abusive injustice is ended? I hope so, I really do. But I'm not holding my breath.
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Oh this is going to hurt, I totally agree about the domicile rule, it is one of the most ridiculous and as we now see exploited rules the foreign ‘rich’ can use to avoid making a full contribution in this country, a country they have chosen to make their home, well, make their home as long as it’s cheap enough.
It is however not just the foreign billionaires who use this ‘loophole’, there are many of lesser wealth who also use domicile rules to keep their contribution towards the country they choose to live in to a minimum.
Let’s hope Brown starts to do his job properly and instead of loading ever greater ‘burdens’ on the majority starts to ensure the ‘rich’ minority also ‘cough up’.
Whilst I agree the rules should go, and can be inheritantly unfair, I’m not sure it is right to label them ‘racist’.
I cannot recall anyone ever trying to justify the massive tax advantages that the UK gives to non-domiciled individuals except by asserting that abolishing those advantages would have an adverse impact on the UK economy.
The Sunday Times magazine lists several reasons for London’s recent “ascendancy” as a financial centre including 9/11, Enron, time zones, the decline of the dollar and the rise of the pound. A survey of banking and finance professionals found that London had the edge over New York as an “economic city” in terms of culture and language, fair and just business environment, regulatory environment, and access to customers, skilled personnel and international markets.
So it’s not clear how much of a part the tax anomaly has had to play here. The magazine article goes on: “Throw in Britain’s phenomenally generous non-domicile tax laws … and you begin to see why the richest Russians, Indians and Emiratis live, work, invest and trade in London. However great these advantages, they were — until recently — only enough to keep London in second place to New York in the global financial league table.”
What is clear is that the concentration of vast individual wealth in London is having an adverse effect on millions of non-rich people in the south-east and beyond.
If the UK government is going to insist that it really must run country as an onshore tax haven for the super-rich, then it should be ashamed. Any moral authority that the UK might otherwise have in international efforts to tackle tax havens would be blown away by a failure to abandon this blatantly unfair and irresponsible practice.
If two individuals are not treated equally on the basis of nationality, it means discrimination based on nationality or ethnic origin.
I actually think any UK domiciled individual discriminated against by his own state and bringing the case to the ECHR would win. And I think the EU Commission would love to further integrate a panEuropean fiscal base and would be delighted by this, much to the despair of the Council of Ministers.
Hi Richard, I, as someone who has and does benefit from the domicile rule, totally agree with your comments and suggestions, also in regard to UK billionaires pathetic tax payments and the generally attractive tax system in the UK even without the domicile rule. I also think that citizenship=taxability, like in the US, is the route to go forward, not only though in the Uk, but also in the oher European countries! What really astonishes me, is that countries like Germany,Italy and France, who are the main losers from the UK domicile rule, are not doing anything about it (indirectly by diplomatic pressure or directly by introducing citizenship taxation themselves), maybe you should concentrate your awareness efforts on them!
The economic arguments of opponents to change are not totally without merit though, I personally would most certainly leave the UK, mainly though because of the high cost of living/real estate.
Which in turn in my view nullifies two other arguments of the opponents: as you state, the negative side effects through daft RE prices,cloned luxury-goods-only high streets, traditional businesses being priced out of their premises etc. now outweigh the minuscule positive contributions. Also, as I have read before, one of the main fears in the American dominated city is, that the UK is no longer attractive for US investment banks-this is the most stupid argument as US citizens are not benefitting from the domicule rule anyway and one of the main reasons for these banks to do business in the UK is the low social security contribution by employers on the large salaries and bonuses compared to Europe(partic. France).
Let’s see what happens in April-Best regards JB
The press stated over the weekend, that the probably biggest beneficiary of the non domicile rule is becoming the financial saviour of the labour party.
While I would not want to imply a cash-for-honours like connection, this makes it even more unlikely that a change will ever be forthcoming without pressure from the foreign governments suffering from this rule.