The following exchange took place during Prime Minister's Questions in the House of Commons yesterday:
Q3. [156090] Dr. Nick Palmer (Broxtowe) (Lab): In the past two weeks, we have heard alternative approaches to the taxation of foreign non-domiciles. Will the Prime Minister confirm that he is confident that the Government's approach will target people who can realistically be expected to be able to pay the tax?
The Prime Minister: It is right that people pay their fair share, and we have taken action against avoidance every year for the past 10 years. This will be a debate held over the next period of time, but I have to say that the proposal that we can find 150,000 non-domiciles to tax is completely wrong: only 115,000 are registered in this country, and only 15,000 have earnings and income that would allow them to consider that paying £25,000 in taxation was in their interests; others are nurses and teachers who earn little more than £25,000. When we asked where the calculations came from, first we were told that they came from Accountancy Age, then we were referred back to The Observer, and then we were referred back to a so-called tax expert, who was unnamed. Those who put forward proposals to tax non-domiciles, and say that they can raise £3.5 billion, will have to do better in future.
I've got news for the Prime Minister - I'm the unnamed man.
How do I know? I asked The Observer. Nick Mathiason has confirmed I was the source of the story he wrote.
Not the only source admittedly. Accountancy Age established that there were 77,000 non-doms in 2002 using freedom of information rules. The Observer repeated the trick and found there were 112,000 in April 2005, an increase of 45% in 3 years.
In writing about this in July this year Nick noted that:
And tax experts confirm that there has been a dramatic surge in claimants in recent months - prompted, ironically, by a Treasury and Inland Revenue crackdown on UK citizens holding offshore accounts.
I was that expert. And I said that on the basis of comments made to me by impeccable Whitehall sources. I was led to believe that at least 20,000 applications were being made for this reason. Add on the average 13% or so annual growth rate from 2005 to 2007 and you have well over 150,000 non-doms. It's an entirely rational, and well sourced conclusion to reach.
Of course the Tories were wrong to say that £3.5 billion could be raised from them by charging them all £25,000 a year to keep the status. It is obvious that by no means all of them benefit from the rule to that amount. So, as I've explained , Osborne's number was wrong.
But so is Gordon Brown's very wrong. The 112,000 number (misstated in the House by Brown) is obviously wrong now, for reasons noted above. And it's just absurd of him to claim that some of these people are nurses and teachers who would not come here otherwise. First of all, all their UK source income would be taxed here anyway if they undertake these occupations. Secondly, how many nurses and teachers do you really think there are who are sitting on significant offshore fortunes which they don't want taxed in the UK? But as a matter of fact people only claim the benefit of the domicile rule (and the numbers quoted record claimants - not the number who potentially qualify, which I have shown to be as high as 7 million) if they get a tax benefit from doing so. If all these teachers and nurses had that cash do you honestly think they'd be here? Of course not.
The fact is the real issues on domicile have been ducked by the Prime Minister. They are:
1. Why is he willing to sell tax deals for the mega rich at just £30,000 a time?
2. What does he think his scheme does for democratic accountability within the tax system?
3. Why is he still willing to tolerate one law for the very rich and another for the rest of us?
4. Why didn't he just abolish the rule and raise £4.3 billion in extra tax to tackle child poverty - about which he claims to be so concerned and for which the TUC have argued?
I'm out in the open now. And willing to debate this issue with any minister. The question is, are any of them up for it?
Come to that, are they going to put their numbers right? And if they say I'm wrong - please say why. But don't quote misinformation. It won't work.
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If only we could elect the Treasury advisors. You’d be top of my list.
I’ve got invitations to see Andy Burnham and Kitty Ussher at the Treasury. I’d like to take you along, but guess that the Treasury wonks would spot some danger and refuse. So perhaps I’ll just mention your name….
I nearly resigned from the party yesterday but have been persuaded to stay and support John McDonnell’s LRC.
Carol
Should be said there were other tax experts who told me there was a marked acceleration in non-dom numbers. They worked for well established tax practices. But Mr Murphy you were the person who got the ball rolling on this one.
I am watching the illegality argument between you and the other Richard on your parallel post with interest. The fact that it has so quickly become about interpretation suggests to me that, were this measure to be introduced, there would be a test case in the courts straightaway which would decide matters.
But what about the suggestion made by Mike Warburton in implied defence of Osbourne’s plan, that Australia, NZ etc already have a system for negotiating with non-doms for a lump sum settlement in return for keeping the remittance basis? If we are talking about, as he puts it himself, negotiations and not a flat levy, then surely that is just the same as any “reasonable sum” type negotiation one might have with the Revenue, and this invalidates his argument. Am I right?
Alix
Such deals originated in Switzerland – and continue there.
As Lord Gill put it – they are deals to be ubtaxed by agreement rather than be taxed by law.
And how is that legal? I think that does invalidate his argument.
Richard
HI Richard
I hope that you will be using your powers under the FOI to get the latest numbers of non-dom claimants following the Offshore Disclosure move, and the fact that this year’s tax return for the first time asks whether the return filer is claiming non-dom status may well help too.
I don’t think the PM said or implied in the statement above that the the nurses and teachers from overseas would not be here if the domicile rule were scrapped. It’s also warming to see that he admits there will be further deabte on the issue of tax avoidance in the ‘next period.’
I just hope that when they bring the 7 to 10 year test in they backdate it to when each non-dom arrived in the UK. Also, if they do take non-domdom I suggest they be made to prove that the overseas wealth is at least being taxed sensibly in whatever jurisdiction they keep it in.