Domicile – Darling copies the Tories and ducks the issue

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The Pre Budget Report says:

Residence and Domicile

The Government today announces the completion of the residence and domicile review with a package of reforms to make the system fairer while maintaining the UK’s competitiveness.

UK residents who are non-domiciled, who currently pay £4bn in UK tax on UK earnings, will now also have to pay an annual charge of £30,000 to ensure that they contribute in respect of the foreign income and gains which they keep abroad and on which they do not pay UK tax. The charge will apply if they’ve been resident here for more than 7 years. Users of the remittance basis also lose their tax free personal allowances. The measure is targeted to protect competitiveness by ensuring that secondees to the City are not affected (the majority have left the UK by 7 years).

The Government will also amend the current rules to remove flaws and anomalies that allow remittance basis users to sidestep UK tax where it is due on foreign income and gains. It will also tighten up the day counting rules to bring the UK into line with international practice.

The Government will consult on the detail and on a wider range of options, including specifically whether those who have been resident here for more than 10 years should contribute more.

This is absurd:

a) The £30,000 charge is a direct copy from the Tories.

b) Why wait for 7 years?

c) Why not create tax justice. The Chancellor said that a fair tax system required:

competitiveness, simplicity and fairness.

This is none of these.

d) He could have had £4.3 billion to tackle child poverty. He’s chosen not to do so. That’s a travesty.

And, his claim to the House that this new rule would raise £650 million a year is not even backed up by his own data. In 2008/09 he says this will raise £800 million in 2008/09 and £500 million in 2009/10 – in other words he expects this to be avoided.

And all this he says is because:

The Government today announces the completion of the review of the residence and domicile rules that apply to personal taxation. The Government has concluded that the existing arrangements make an important contribution to the UK’s competitiveness, by making the UK an attractive place for skilled people to come to work and do business and where non-domiciles contribute £4 billion of tax on UK earnings.

That’s half what they should pay.