The Guardian is reporting this morning that:
“People are jumping on planes right now and leaving,” said Nimesh Shah, the chief executive of Blick Rothenberg, an accountancy firm that specialises in advising very rich “non-doms” on their tax affairs. “I am not being dramatic, they are leaving right now.”
Shah said his clients – some of the richest people in the country – were “petrified” of plans to abolish the “non-domicile” regime, through which for the past 225 years wealthy people have been able to live in the UK and not pay tax on their overseas income.
You can sense the hyper-ventilation from which Shah must be suffering oozing through every pore of this comment, largely because he senses his business model is disappearing in front of his eyes.
And what is it that his terrified clients are so frightened of? It is the risk that they might have to pay a fair contribution in tax to the country in which they wish to live and which they want to host their activities whether they are socially desirable, or otherwise.
There are three things to note. The first is that advisers like Shah are always inclined to overstatement, usually to protect their own self-interest.
Second, that said, I am sure he is right. Some of the thoroughly anti-social people he represents will leave the UK. Shah has every reason to worry about the future profitability of his firm if he is dependent upon them.
Third, he is drastically overstating his case. Some people will leave. A very few will do so straight away. But the vast majority will have good reason for staying. Methinks the man doth protest far too much.
And as for those poor, petrified clients? Maybe they should try living with the fear that you have no idea where the next meal might come from whilst being harassed for repayment of innocently overpaid carer's allowance that you have no chance of ever refunding. Then you might find out what fear really feels like. As it is, I don't give a damn about their fear that they might just have to pay some tax, because is exactly what they should be doing.
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I don’t move in “mega rich” circles so I have no idea how they will respond…. but, frankly, I don’t care
I have spent time rubbing shoulders in the office with many fairly wealthy folk from overseas that choose to make London their home. Most could use the “non-dom” rule but don’t because the “remittance fee” required would mean that you need overseas assets of about £10 million to make it worthwhile. They own property here, send kids to school here… and keep their wealth here. They ain’t moving on account of the non-dom change.
I do see people moving overseas but it is UK dom people moving to low tax countries (if the the job can be done anywhere). Non-dom rules will have no impact here… but I do think there is an issue. These folk live overseas paying no UK tax, enjoy the benefits of a UK passport and, as long as they have paid up a notional NI amount can return to the UK and claim a State pension, send kids to State schools and use the NHS etc. later in life when they need it. Our tax/benefits system is “front loaded” – ie. we “put in” during our working lives, we “take out” as we get older; these fold should “put in”.
“I don’t move in “mega rich” circles so I have no idea how they will respond…. but, frankly, I don’t care”!!!!
What a wonderful summation of how 90% of people worldwide really feel!!!!!
Make that 99% of people worldwide actually.
Will nobody think about these poor (incredibly wealthy) tax avoiders?
“Clubbing over head” still much in vogue in “Stoneage” UK. If you don’t do as I say and let us rich folk pay as little tax as possible we going to withdraw our investment money from the UK! If you deign to claim government benefits we’re going to make you live in fear for getting any by jumping heavily on you for any slight infringement!
Anecdotally, I have heard about several wealthy people and families who have already left the UK for good. They are not “petrified”, just taking a rational decision. Some were considering going anyway – the UK is not as nice as it used to be, there are plenty of other places to live if you are wealthy and mobile, and this was the last straw. Others are just not prepared to take the risk that their position may change in a materially adverse and unexpected manner. Part of this is that the details of the proposed changes (Conservative or Labour) are not available so it is not possible to give clear advice. I suspect the numbers leaving will be less than the apocalyptic predictions of some, but also significantly more than negligible. Not all, not even most. But more than a tenth. Perhaps a quarter.
I’ve also heard about other people who were considering coming to the UK but have changed their plans. Several other counties have quite attractive tax regimes for wealthy impatriates. Italy in particular.
Some people are coming or going from the UK all of the time, but there are a large number of people whose jobs depend on some remaining here, and the ones leaving being replaced. I am sure the heart bleeds for Chelsea restaurateurs, Bond Street retailers, art galleries, estate agents and private bankers, and all the other businesses serving the wealthy, but there are thousands of jobs, and significant amounts of corporation tax from the businesses, income tax from the employees, and VAT from the sales, all now at risk.
Don’t get me wrong. There is a very strong argument to deal with rampant inequality and unfairness in the tax system, but we should be aware that the UK is going to lose some jobs and tax revenues as a result. The hope is that we will gain more than we lose. Or that the net price is one worth paying.
The reduction in inequality will make this well worthwhile
“…– the UK is not as nice as it used to be…”
Well – TBH had they paid their taxes, UK would’ve been a much nicer place to live. You can’t not pay taxes and then complain that in UK nothing works.
By and large non-doms have paid the amounts of UK tax that they were required to pay.
The remittance basis for non-UK income has been a feature of income tax since it was created (initially for everyone, but restricted to non-doms in 1914, at a time when only the wealthy paid income tax – about 1 million out of a population of 40 million).
Sure, the estimates are that non-doms could pay an extra £3 billion or so in tax. Against over £1000 billion of public expenditure, that £3 billion is at the same time a large sum and also less than 0.3%. About £40 per person in the country. And if some non-doms move away (or don’t come in the first place) then the net extra tax revenue will be less.
In terms of numbers, HMRC says there are about 60,000 UK resident non-dom taxpayers, so we are asking for about £50,000 extra each, albeit the distribution is strongly skewed to the upper end. Around 2000 non-doms have been resident in the UK long enough (7 out of 9 years) to pay the remittance basis charge. Most are here for quite short periods.
As for “freeing up space” I don’t know how many readers are in the market for £2+ million apartments, but many buyers in that space just want a nice place to stay when they are in London, with no intention to become resident in the UK. This tax change is not going to make much difference but it will affect those who want to stay longer – students, say. Those who are longer term resident are using private schools, private healthcare, etc. And small numbers anyway so it won’t make much difference to capacity for public services.
Again, I see the strong argument for the change, but the debate needs to be a bit more nuanced than simply bashing the rich. I would suggest we do actually want the wealthy to stay in the UK – to invest in businesses, employ people, buy goods and services – and also pay their fair share of tax.
The idea that people are “petrified” is overblown, but affected people will actively consider whether to stay or to go. And some will go. We won’t even see the people who just decide not to come in the first place.
I am far from convinced that encouraging wealthy foreigners to come to the UK is a positive either for those already here or, indeed, for the”economy”.
We know trickle down doesn’t work. So their wealth will not go to other residents.
We know that excessive wealth and inequality distorts the economy, particularly housing.
What is the supposed benefit of non-doms? Does anyone know?
It was a colonial era tax ruse that has massively outlived its usefulness.
There is stuff on it from about 2008 on this blog giving more detail.
Until such scaremongering is accompanied by a credible analysis of how much damage such an exodus would do to the economy, it is just so much bloviation. The reality is that the economy would benefit thanks to the extra tax levied on those who stay.
There was a recent case where highly payed execs were given the opportunity to relocate to a Swiss Cantyon with particularly low taxes.
Nobody did because they liked living in London and were willing to pay for it.
Similarly I understand that Monaco isnt that attractive as a permanent resident, its up there with Severn Beach even if the weather is better.
There is a great deal of evidence to support this
Some of them will leave and good riddance. If they have to sell their over-priced properties even better. Most won’t as London as England is still the ‘best’ place for them to live. Homes for their money as well as to live in. Private schools and medicine. Any number of people to act as their ‘butlers’.
They’ll be the ones with the dodgy properties owned off-shore which Private Eye exposed. https://www.private-eye.co.uk/registry Just around me I cycle past a number of their country houses – one owned by Lebedev and half a mile down the road another clearly owned by a Russian or Eastern European oligarch. Just tackling the scams around property, along with the un-progressive nature of council tax would surely generate a decent amount of money, and have widespread support.
“Most won’t as London as England is still the ‘best’ place for them to live”
The UK needs to adopt a US style *local property tax and you would see all these “investment Mega Mansions” sold up immediately.
*In the USA, local property tax is paid to the local municipality(s). If you own a home in the “City of Tampa” you pay property tax to the City of Tampa and Hillsborough County. Property tax on your “homestead” property has a generous discount but all other property (residential and commercial) is taxed at a much higher rate than a homestead property. This property tax is the responsibility of and paid the by the owner not the tennant.
Sounds right to me. My son lives just outside Detroit and they pay those taxes. Pays for schools, police, fire etc. It’s significant but they don’t complain.
Robin,
Basically it works the same way in Florida.
If a property is owned by a corporation in Puerto Rico, Bailiwick of Jersey or Panama, they pay the same rate of tax as a New York corporation or a private individual owning the property as a second home. If Florida this tax rate for a “non-homestead” turns out to almost the rate for a “homestead” as no discounts or deductions are given.
All this tax money stays LOCAL and does not get anywhere near the Federal IRS in Washington, D.C.
Typos!!!!
Should be:
In Florida this tax rate for a “non-homestead” turns out to almost TWICE the rate for a “homestead” as no discounts, allowances or deductions are given to “non-homestead” properties.
Hi Richard
I think your last paragraph very neatly sums up my thinking on this. I found the Guardian article rather distastful (do they also have a “Poverty correspondant”?).
I’m was always under the impression that “the market” is able to spot a gap, and fill it. So when these people take their money and business abroad, someone will step in and fill the gap, if any.
I would have though these “free marketeers” would applaud this affirmation of the “Market”.
regards
As a matter of interest do you know what the regime is in other countries, particularly the US? Do residents have to declare worldwide income and pay tax on it?
BTW, off theme, have you noticed that Zimbabwe has started issuing a new currency, the ZiG, which is supposedly exchangeable for gold? I say “supposedly”, because I doubt that the Reserve Bank of Zimbabwe has sufficient gold in its vaults to redeem all the notes it will issue. It remains to be seen whether the Zimbabwean population trust them to do so. For the first 21 days they will be able to exchange US dollars for ZiGs at a rate of 13.5, after which the rate will depend of the market value of the commodity.
Is is protrude income – but there are de minimis exceptions
Italy is nearest to us in Europe prior to domicile going
As you didn’t actually answer my question, Richard, I did my own research and in fact there are 8 other countries with similar regimes, including Switzerland, Italy (as you say) and Ireland. The US is not one of them.
Furthermore I do wonder if, as you highlight in your Taxing Wealth report, HMRC have the resources to chase up this tax when it would involve finding out what overseas earnings these people have. I do suspect that very little will actually come in as a results of this change and it is mainly a matter of political posturing.
Your second para is key….
And I have been out all day acting as a removal van drIver for a son….
I can only speak for France, where all residents (of whatever nationality) have to declare worldwide income and pay tax on it – in France. There is a double taxation agreement with the UK to prevent double taxation. Makes sense to me.
In response to Clive’s comment above, this does allow me to claim my UK pension (based on the number of years I worked & paid NI in UK), in addition to my French pension for the years I worked here, which also seems fair. I might add that I didn’t move to France because tax was lower (it isn’t!), but because I married a Frenchman.
Do not forget that BlowJo Johnson who is (was?????) a US citizen got into big trouble with the US IRS when he sold a second home in the UK and did not bother to declare the sale nor did he bother to pay capital gains on the financial windfall of this property transaction on his tax return.
The fact that Mr. BlowJo Johnson was not residing in the USA made absolutely NO difference to the US IRS.
Franklin Roosevelt, when told that many if the richest people would leave the country if his tax reforms were implemented is reputed to have said “I know many of them well; I will miss them!”
Where’s Mike Parr when you need him? Mr Parr, as a gentleman with more of an engineering background than the rest of us here, I’m wondering if you have the odd electron microscope lying around I coul borrow.
I need it to find my nano violin that I dropped in my shock at reading this terrible news. The one I was going to use to play a lament for poor Mr Shah and his abused, downtrodden and oppressed super rich clients.