In an editorial this morning the FT says:
More than two centuries after the introduction of income tax by Mr Pitt, his successors should end the egregious situation where the wealthiest enjoy the privileges of UK residency without paying their fair dues to the exchequer. The anomaly of non-dom status cannot be defended. It should be scrapped.
There's not a lot to add to that.
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Well,yes there is.
You would need to shut all the finance ministers in the world in a room with en-suite facilities and bread and water until they agree universal double-taxation treaties that were interpreted exactly the same in all countries. Someone can be deemed resident in four countries simultaneously under HMRC’s rules. I should be quite content with a top marginal tax rate of 50% or 60% but not one of 200% or 240%.
That’s why there are tie breaker clauses
I really do not know what you are trying to say here.
Some people *are* taxed twice by different jurisdictions.
And rather more are not taxed at all
I would rather neither
That is an argument for my suggestion!!
DO we have to give them bread and water?
People have funny ideas about where this so-called “anomaly” arose. Pitt’s income tax of 1799 to 1802 is irrelevant, as is Addington’s income tax of 1803 to 1816. You may as well refer to the window tax, or scutage. Income tax only came back on a permanent basis under Peel in 1842, and, as far as I am aware, until 1914, UK income tax was never charged on overseas income, unless the income was remitted to the UK. That changed under legislation introduced by Lloyd George as Chancellor of the Exchequer in 1914, when tax was extended to the overseas income of UK residents, even if it was not remitted, with an exception for persons not domiciled in the UK.
The suggestion made elsewhere that the remittance basis was introduced as a sweetener to encourage the wealthy to come to the UK is also somewhat misplaced. Until the First World War, income tax was only paid by the comparatively wealthy anyway – there were only about 1.1 million people paying income tax in 1914, when the UK population was about 45 million. The argument then was about which wealthy people should pay income tax, and until then it had been accepted that income tax should only be charged on income that was earned in the UK, or income that was earned overseas but sent back to the UK. Perhaps over time the remittance basis has become a sweetener, but it was not introduced as one.
Anyway, enough of the history lesson. Obviously we can change the tax system if we want to. So why settle for just abolishing the remittance basis? Why not go the whole hog, and charge tax on the worldwide income and gains of all UK nationals and residents, like the US does for its citizens, green card holders, and long-term residents?
Would you also abolish the relevance of domicile for determining liability to UK inheritance tax?
I think the domicile concept and tax considerably pre-dates 1914
And I have long advocated a ‘passport tax’
Domicile has long had a role in inheritance and inheritance taxes, but not as far as I am aware in income tax. But I could be wrong – please do show me a pre-1914 income tax rule that depended on domicile.
So, abolishing the remittance basis for resident but non-domiciled individuals is just a first step to taxing all UK passport holders? OK. So what would happen to a person who for example is a dual UK and US national? Which goes first, if both consider the person to be tax resident?
I am aware I have read about it much before 1914
My recall may be incorrect
The problem with a passport tax (apart from the fact that the passport itself is an outdated concept) is that there is no reason why someone should pay tax in a country they don’t live in.
Why on earth should Boris Johnson pay US tax on his earnings (if any) from France, when he lives the whole time in the UK? The US has no moral right to tax those earnings. And why should he pay US income tax on interest earned from a UK ISA?
Simple: he gives up US citizenship
In fact, I do not propose such a system
I suggest if a person lives in an ‘equivalent state’ paying full tax there absolves the obligation in a home state, even if different
Well, here is a copy of the Income Tax Act 1842. http://books.google.co.uk/books?id=5rgDAAAAQAAJ&pg=PA1 It looks surprisingly familiar to those who knew the Taxes Act 1988 or earlier Acts.
For example, the charge on “foreign securities” and “foreign possessions” under the Fourth and Fifth Cases of Schedule D is limited to amounts received in Great Britain. (You can also remind yourself what Schedules B and C covered.)
As far as I can see, that Act does not contain the word “domicile” or similar expressions at all.
Noted