Domicile – the Observer picks up the argument

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The Guardian and Observer picked up the argument, first mooted on this site, that the Conservative's domicile proposals are illegal, in two separate articles on Sunday. The Observer noted, with reference to tomorrow's pre-budget report (on which there will be real time comment here):

Some think he is the most evasive person in Britain on the issue of tax. But on Tuesday there will be no place to hide for Gordon Brown. In 2002, the Prime Minister launched a review into the economic benefits that allow the world's richest tycoons to live in Britain without paying tax on their overseas income. Five years later no study has materialised. Last week, the Conservatives out-manoeuvred Labour by unveiling a plan to tax the super-rich.

Surely, this time we will see movement? But I still don't hold my breath.

As they added:

But the non-dom super-rich may not be demanding urgent meetings with their accountants just yet. One senior tax adviser suggested that the Tory plan constituted illegal state aid and could trigger a challenge in the European Court of Justice. Tax expert Richard Murphy believes that, by ringfencing one group of individuals and giving them a perceived advantage, the Conservative proposal could constitute harmful tax practice.

The Guardian noted:

Shadow chancellor George Osborne's plan to fund Tory tax cuts through a £25,000 surcharge on non UK domiciled tax payers may not be enforceable, according to tax experts.

But there are questions as to whether charging a £25,000 fee to allow someone to claim "non dom" status and receive the tax benefits would be legal.

"This is a payment not to pay tax," said Richard Murphy of Taxation Research. "As such it represents a ringfence. According to Dawn Primarolo [formerly a Treasury minister, now health minister] when she chaired the European tax practices harmonisation group, a ringfence is a harmful tax practice and would run foul of both EU and OECD regulations."

His doubts about Mr Osborne's proposals were echoed by Prem Sikka, professor of accountancy at Essex University. "It has not been thought through, is of questionable enforceability and could be in conflict with race relations legislation," he said.

Quite right.