Jane Kennedy adding nothing to the domicile debate

Posted on

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.