It's claimed if non-doms don't live here they won't invest here. And that means that if they leave that their investments will too.
This is true, in part. If the non-doms don't live here they won't buy houses here and so drag up property prices. We should all, on that basis, be pleading for them to go. When people doing valuable jobs in our community have to live with their parents into their 30's because there is no chance of them buying a property of their own we have a seriously screwed up economy. Non-doms have contributed heavily to the creation of that situation.
But that's only one part of the non-doms investment they might make here: the rest is in business. Now let's assume that non-doms are rational people who accords with the principles of the economic man or women who underpins all models that say that the market economy works best for our well being. If they do then they will, when investing in the UK, do so entirely on the basis of the return available on their investment. And let's be clear, any business located in the UK is taxed in the UK, whether owned by a domiciled person or a non-dom and whether run through a limited company or not. So at this level the presence of the non-dom in the country makes not one iota of difference at all to the investment decision when it comes to the taxation of returns. So can we stop the debate on this point please? It is meaningless.
There is a difference though: it is on capital gains when the business is sold. Right now the non-dom need not pay capital gains tax on this gain if the asset is registered as held offshore and they do not remit that gain back to the UK. So at the moment of sale the non-dom gets an advantage. But let's be clear what the advantage is: it's an advantage when it comes to getting out of Britain, and not when it comes to investing in Britain. So can we again stop the complete nonsense written to the contrary on this point?
Finally, can we ask a simple question? Why do we want to give those not resident in this country a taxation advantage over those who are resident in this country when it comes to selling UK businesses? And why anyway do we want to make it so easy for those with transient interest in the UK to quit it? I'm completely baffled about this as a basis for any sane economic policy designed to encourage investment. This policy seems all about disinvestment.
Can you enlighten me Digby Jones?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
When Digby became a Lord he stated that he wouldn’t toe the party (New Labour) line.
Sadly his own views aren’t worth the paper they’re written on most of the time.
The pragmatic answer to the question? Yes of course we will lose investment! Why would anyone invest in UK assets when they could invest outside the UK and not pay the tax? Work it out for yourself Richard.
So if the non-doms don’t live here, they won’t buy houses? That is just laughable. Have you any idea how many houses in the UK are owned by people who are not even resident in the UK let alone domiciled? Plainly, painfully plainly not!
Non-doms are a very small portion of the population, the reasons for high property prices are complicated. Non-doms are just one factor not THE factor as you seek to misrepresent them as.
I like your assertion that CGT is a matter for when you get out of Britain. Of course in the real world, UK residents sell businesses and make gains so CGT is a decision actually when you sell a business and it is a big issue – to quote from an episode of the well known series Minder (which I am sure you hated, Arfur did not pay tax!) – “Why pay tax?”
Why has the tax break been good? Are you being serious? It encourages people to invest in the UK! CGT is a big, big issue and the present system has encouraged massive investment by non-doms in the UK market. Now ludicrously we are moving to a position where our own government is discriminating agianst UK assets in favour of non-UK assets and you ask if we will lost investment? It is not really a very hard question to answer.
The real question is why have the government made such a mess of this and why have they ended up with a ridiculous policy which actively hurts the UK economy by incentivising investment outside the UK? That is a much better question than your “starters for 10”.
If non-domicile is such a great concept for an economy then why is it that the UK is the only jurisdiction that recognises it for tax purposes?
Even the USA forces its citizens to pay tax on their worldwide income irrespective of domicile or residence. Some pro-dom commentators might think this very draconian. 🙁
The UK is not the only jurisdiction to have a tax system based on domicile. Ireland also has it. Many, many countries tax foreigners more favourably than their home population, most obviously Switzerland but also Spain where a foreigner can more very tax efficiently to Madrid, Australia which gives tax breaks to new immigrants. Then we have countries like Singapore, Hong Kong and the UAE. There are many others too. In relation to America, it has far more generous rules than the UK on residence which mean foreigners can spend quite a time in America on business without paying US tax … but that is another story.
Phil
Can we have some facts please?
Your rhetoric is tedious.
I do use reasoned, verifiable argument.
Until you do you really are not adding to this debate.
Richard
An interesting debate. There has certainly been a huge number of articles written on this subject, many misleading.
I do not think the introduction of the £30k “tax” will cause a mass exodus of non-doms from the UK. What it will definitely stop (or significantly slow down) however is non-doms investing in the UK. The governement intends to tighten up rules that allow non-doms to turn interest into capital at the end of each tax year (called “source ceasing”). Capital can be bought into the UK tax free.
This effectively means that non-doms will stop bringing capital into the UK to invest in UK businesses. I know many non-doms who will chose other places to invest because their initial capital investment will not be taxed when they invest in that country (thus Phil’s point is valid – other countries will get the benefit).
I also know that many non-doms do not use offshore companies to invest in companies within the UK. The government has many tax efficient ways to encourage this e.g EIS (Enterprise Investment Scheme).
The long and short is that the legislation has been rushed and not thought through properly. The UK will lose out from wealthy foreigners chosing not to bring money into the UK to invest.
I knowof one NZ “business angel” non-dom who has effectively said it makes no sense to bring money into the UK when he can invest directly into Australia/NZ without paying tax. Of course he will continue to live in the UK, but his angel investments will be elsewhere.
Oh well……… 🙁