Bloomberg has reported very recently that:
The U.K. Treasury, which has been examining tax rules for wealthy individuals with non-domicile status since 2002, said it earns 3 billion pounds ($6 billion) a year from individuals who qualify for the tax loophole.
Jane Kennedy, a junior Treasury minister, said people born overseas who reside in the U.K. report about 9 billion pounds a year in income and pay about a third of that in tax. She said the Treasury will balance demands for fairness with the need to keep the economy competitive in attracting the rich to the U.K.
``Resident non-domicile taxpayers are a relatively small group who are liable to pay tax on U.K. earnings, and the exchequer benefits to the tune of 3 billion pounds,'' Kennedy told lawmakers in Parliament today. ``The government is mindful that any changes to the current system would need to balance carefully the rules of ensuring fairness and of promoting the U.K.'s international competitiveness.''
Now let's debunk this:
1) There are 112,000 non-domicile people according to HMRC;
2) Divide £9 billion by 112,000 and you get £80,537
3) The tax due on £80,537 this year is about £23,600 allowing for normal personal allowances;
4) That's 29% tax.
So all that Jane Kennedy has reported is the UK source income of these people. Nothing more. The question of what is not being declared in the UK by these people and what tax is therefore lost is not answered by her comments.
The reality is that most people who are not domiciled in the UK will not leave if the rule is changed. They are here because the UK is a very good, and maybe the only realistic, place where they can do business either at all or at the relevant stage of their career that makes them mobile and in need of securing the experience that only the UK can offer.
So being quite realistic, the comments add nothing and absolutely no reason at all for not changing the rules.
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“The reality is that most people who are not domiciled in the UK will not leave if the rule is changed. ”
I respect your opinion, but what evidence do you have for this statement?
Peter
Simple, obvious commercial logic. There is no so such logic to the opposing view. Money is best made here. In that case tax will always be a secondary consideration because if money is not made then no tax is due. And that’s why the threat to leave is idle chatter which any wise person would ignore as a hollow threat, just as was the threat that FTSE 100 companies were queuing to go a year ago.
Richard
You say money is best made here, but your figures show these people are only making about 80,537 each on average. I don’t follow your logic
Peter
£80,000 puts people in about the top 3% of earners (from memroy). These people all have other earnings or they would not have got approved non-dom status. It’s likely therefore that they’re all in the top 1% of income earners.
And you say that this is no evidence that this is the place to earn or that this system favours the already well off? What evidence do you want?
Can we “get real” to use the vernacular?
Richard
Richard
£80,000 is less than the salary of an average NHS consultant so let’s keep it in perspective – a good wage for a successful professional but hardly in the top league. But I take your point that people like non-domiciled hospital consultants and employees of multinationals here on secondment would not be put off coming. Most of them come from countries with a double tax agreement with the UK in place anyway, and in many cases their main source of overseas income is from renting out the flat they left behind when they came here to work.
But I’ve misunderstood you. I always thought your attack on the non doms was not this group of 112,000 people earning £80,000 a year, but the group of super-rich non doms like the the Hinduji brothers and the Greek shipowners. And I do think that a lot of these people who have truly international business interests would relocate if the uk attempted to tax them on their world income.
But what of the people domiciled in the uk who live in for example Monaco and spend Monday to Thursday working in London and manage to be officially non tax resident in UK under the 90 day rule? I think these are more worthy of your ire than the non doms.
Peter
Isn’t the point here about the level playing field. All countries have residence requirements, but only the UK and Ireland have domicile. Residence allows certain very rich individuals to work in the UK but live abroad in tax havens, but that’s the same for all countries – and at least while they are working here they are supposedly contributing, while their wealth is not driving up inflation. Domicile allows rich people from abroad to live in the UK whilst not paying the full UK tax on their worldwide earnings. That does drive up inflation in the UK whilst they contribute little.
As it’s really only the UK that has domicile, scrapping it doesn’t put us at a disadvantage with the likes of the USA, Germany, or indeed anywhere else.
[…] This is ludicrous reporting. According to Jane Kennedy non-doms in the UK pay 3 billion in tax. And as is obvious, £45 million is not a doubling of that tax bill, just as £45 million is not a doubling of £57 million. […]