CIOT domicile debate

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I spoke at the Chartered Institute of Tax debate on domicile on Tuesday. Since much of what was discussed was covered by a fairly severe form of the Chatham House rule I can't report much. .

I can say there appeared considerable agreement on the following:

1. Change to the rule is required.

2. The proposed changes create more problems than they solve.

3. After five years of review of this issue by HM Revenue & Customs and the Treasury the resulting consultation document is weak, not based on principled argument and is subject to far too short a period of debate before legislation must be rafted if to be in the Finance Bill.

I, of course, argued for complete abolition of the rule on the grounds that the domicile rule could never create distributive justice.

One brave soul outspokenly agreed, quoting paragraph 1.3 of the consultation document which appears to leave no grounds for retention of the rule. It says:

It is only fair that people who have chosen to make the UK their home (and who enjoy favourable tax treatment over the long term, and even pass this on to their children) should make a reasonable tax contribution to the modern public services which support our society. Equally, it is not acceptable that anomalies and flaws in the current rules and practices effectively excuse people, in certain circumstances, from the need to pay UK tax. Nor is it fair that rules and practices designed for an age before rapid modern transport can be manipulated to avoid paying UK tax.

But all the usual nonsense from the usual sources was rolled out in defence of both privilege and abuse. It was deeply depressing to hear.

Not as depressing though as the person who spoke to me during the coffee break who said that the poor in this country are getting wealthier because of the influx of wealth the domicile rule has created. This is trickle down theory - and it's both abundantly clear it does not work and that the evidence is simple: the gap between richest and poorest is increasing. And that gap matters. It's not just absolute wealth that matters. It is relative wealth. And anyone who argues otherwise defies all research in this area.

But even if it wasn't, try telling the person struggling on minimum wage plus benefits that the domicile rule benefits them. Tell that too to the person who can't buy a place to live within any reasonable reach of their work. Tell that as well those facing perpetual funding cuts because the government chooses instead to fund the mega wealthy, which is what they are doing by retaining the domicile rule. And tell that to all the children who live in poverty in the UK, a situation that could be resolved for £3.9 billion, a sum less than the 100,000 or so non-domiciled people cost this country according to my calculations.

And please don't tell me that the City will collapse if these people leave. If it will then it's really not the power house you claim it to be. Nothing that vulnerable can be. So this is straightforward rubbish: I believe you really are as good as you claim to be.

In that case let me put this another way. I've done my sums. I have a case. And as yet I've not heard one from those who want to keep the rule aside from their threats and bullying, which are deeply unattractive.

So now I issue a challenge: put up real data showing real benefit, or shut up.


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