I've been asked to summarise what I think about domicile. I haven't been able to do this in writing in the time available, but try this video instead:
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Have you seen the CBI leader Richard Lambert’s comments in today’s Times referring to the need for fairness in the tax system in relation to non dom and private equity tax status. Interesting.
You say there is no benefit to the UK from the domicile rules. But what about those people who have UK domicile but who are tax resident outside the UK? They are all liable to UK inheritance tax, although they no longer live there. There are now hundreds of thousands of retired people living and paying taxes in France and Spain from whose estates the UK Exchequer will benefit hugely on their deaths. Also, those people are resident and domiciled in the UK but whose spouse is a non dom do not benefit from the spouse IHT exemption when they die, which is another huge boost to the UK particularly because a lot of these people are unaware of this. I’ve not seen any research on the amounts of tax involved here, but it would be interesting if someone could table a question in parliament to find out.
Peter
You assume these people pay the IHT they owe.
I’m sorry to say that I think there is almost no evidence that they do. “Honesty box” taxation has never worked that well. That’s the flaw in your argument.
Richard
Richard
I’m afraid there is considerable evidence that they do. Charles Clore, for example, was living in Monaco when he died and his estate paid up. And it looks as if Robert Gaines-Cooper who lives in the Seychelles is going to pay UK income tax and UK capital gains tax as well. And there is now so much information sharing between the EU tax authorities that I think it’s unlikely that people will escape the net.
You shouldn’t automatically assert that everyone is dishonest and trying to cheat the exchequer. You could say, for example, that most surviving spouses of deceased Brits living abroad don’t inform the UK pension authorities and carry on collecting the dead person’s pension. But it probably isn’t true!
And you didn’t comment on my point about the loss of IHT exemption on the transfer of assets on death to the non domiciled spouse
Peter Verstage
Peter
I think you stretch credibility when you suggest that there is serious voluntary information exchnage on IHT. There is not. And as matter of fact offshore tax avoidance is rife. 62,000 people have admitted to it in the recent tax amnesty. Do I really need to say more?
As for your second issue, minor loopholes and issues are not reasons to stop major reform of tax in the interests of justice.
Richard
Richard
There you go again – you assert with no evidence that there is no serious information exchange between the different EU jurisdictions. And to back up the assertion that offshore tax avoidance (I think you may have meant tax evasion) is rife by saying that a mere 62,000 people have admitted to it doesn’t really say much. Let’s put this into perspective and compare it with onshore tax evasion. A recent study indicates that under-reporting of income by the self-employed in the UK amounted to 10.6% of GDP.
Peter Verstage
Peter
I made the point that volunary information exchange on IHT in the EU is rare. I think I am right.
And I presume by suggesting that systemic abuse by about 10% of income tax payers results in 10.6% loss of GDP in tax is indication of agreement on your part that serious and systemic non-declaration of tax occurs when opprtunity arises, as it does for people domiciled offshore.
In which case I’m not making an assertion, I’m making a comment suppoirted by evidence. Which is something quite different.
Richard
Under the current domicile rule the Revenue is able to (and does) levy inheritance tax on “UK” domiciliaries even if they are not and never have been UK resident for other tax purposes.
So if the current domicile rule were to be abolished, the government would probably move to keep up the existing stream of revenue by taxing all British citizens regardless of residency, rather like the US does.
One iniquitous system replaced by another even worse.
John
Your argument re residence is wrong. If a person has never been resident it’s very unlikely they are domiciled.
As for citizenship based taxation: I am wholly in favour, and have said so for some time.
Richard
Richard
I’d be interested in the arguments pro and contra citienship based taxation. Can you refer me to anything on this site? Or elsewhere?
Thanks
Peter
Peter
There is some discussion of the whole issue of the basis of taxation of international income, inclusing the citizenship basis in Tax Us If You Can of which I was the primary author for the Tax Justice Network. See http://www.taxjustice.net/cms/upload/pdf/tuiyc_-_eng_-_web_file.pdf
Richard
[…] And for those not sure what the domcile rule is, this video might help. […]
[…] Let’s consider the related issues of domicile, private equity and capital gains tax. Alastair Darling had to do something on these issues. Earlier this year we had the farcical situation of some in the private equity industry saying they were paying tax at lower rates than their cleaners. There were three reasons: […]