The FT editorial this morning says:
I agree with all that. But then the FT reveals its spots. Having implied that changes to rules on non-domiciled people and on private equity might not be justified, it says:
But politicians need to factor in the cumulative burdens of doing business in Britain, and the wider signals they are sending. Wealthy individuals are footloose, and other countries — with more generous tax offers — are ready to take them. Push too far, and the tax base will also fall.
With a nod and a wink the FT is promoting the idea that the so-called 'wealth creators' will leave if taxes are imposed on them.
Except, that is not true. They do not leave.
So what the FT is really saying is to keep the balance of taxation as it is, and not increase it on the wealthy. Let those worse off pay more, in other words. What a surprise.
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From that link:
“research from LSE using tax data, which showed that previous reforms to the non-dom tax status . . . resulted in modest increases in emigration by those affected.”
I read that as meaning that at the margins a modest number of people will indeed emigrate.
A few, yes
Irrelevant, in other words
And there are almost always other factors involved as well
And why would we care about a few people migrating, when we have a government that doesn’t care about tens of thousands of people dying early because of their policies?
Well said
Not sure the LSE “study” you link to proves much of anything. They asked only 35 people and I’d guess there will be a bias inherent. People who are more likely to move for tax reasons aren’t going to be as likely to admit it to a researcher.
In the company I work for already we’ve moved hundreds of staff out of the UK primarily for tax reasons. Dubai being the main place they are going. By choice. Switzerland being the other main destination.
I’d estimate the tax loss to the UK exchequer will run to many millions.
To say that people don’t leave the UK because of tax is simply not true.
People do and so do companies.
I have taken part in many sessions on corporate relocations for tax reasons
They really don’t happen
Head offices move
Tax haven structures are created
Value creation does not move
So, abuse happens but actual relocation does not
And of course some people leave the UK for tax – but the numbers are tiny
The article is : https://eprints.lse.ac.uk/121396/1/III_Working_Paper_131_Tax_Flight.pdf
You seem to be interpreting this without having read the actual research, as they did attempt to look at persons who had both moved and stayed in that 1% survey, for balance purposes.
The key findings were:-
• None of the individuals we interviewed were currently planning to migrate out of the UK
for tax reasons or were actively considering tax migration in the future. Furthermore,
among those who had made the decision to leave the country, tax did not feature as the
central driving force for their move.
• The vast majority would never consider migrating for tax reasons. A combination of careerrisks, administrative burden, familial upheaval, attachment to the places they call home (predominantly London Zone 1 and to a lesser extent Zone 2), and reputational risk, were cited as the main reasons underpinning this decision. However, many were concerned thattop tax rates in the UK were currently too high and would rise further.
• There is a stigma attached to tax migration. Interviewees were disparaging about those
who chose to move for tax purposes. Some judged tax migrants on moral grounds as un-
duly economically self-interested, while others expressed a snobbery about tax-advanta-
geous destinations as boring and culturally barren.
• A minority of interviewees said they would not ‘rule out’ tax migration but only if the
political and economic conditions in Britain changed dramatically. A return to top tax rates seen in the 1970s or a Jeremy Corbyn-style government were frequently cited as ‘red-line’ conditions.
• Interviewees were sceptical about the prevalence of tax migration in the UK. Most
acknowledged that tax was a factor in decisions they and their wealthy or high earning
colleagues and friends made about where to live, but this was rarely decisive.
• Interviews with London-based individuals revealed that the most important factor under-pinning their reticence toward tax migration is the attachment they have to Inner London as a place to work and live.
• Key ‘pull’ factors were easy access to London’s unparalleled cultural infrastructure (par-
ticularly high culture like opera, theatre, ballet, contemporary art), the ability to maintain
key social ties, access to privatised health services and private schools, and a more general attachment to British culture and values
The bias, if any, seems to be more spatial and towards Inner London residents.
Many thanks
I did not have the time to wrote that
The ‘rarely decisive’ bit is key – and reflected in corporate research as well
Sharon, you are so very right.
Who can forget the 1960s and 1970s when all the Uk pop stars (& there were loads of them) left the Uk to live in places such as Timbuktu, Indeed, I remember well the Rolling Stones concert in Ulan Bator – their new place of residence. Led Zeppelin moving to Uruguay, Bowie in the Channel Islands – this list is long and goes to show that indeed taxes at 70% – 90% drove people all over the place. London was a desolate place, no music, no talent, no anything…….& all because of tax.
I think I will have a lie down now.
🙂
Mike – you cite massive pop stars of the 70s/80s, but I disagree with your assumption they escaped primarily for tax reasons.
Their immense fame would have meant an inability to live anything like a normal life here. it is not just about tax. Quite possibly nothing to do with tax at all.
Do you know anyone who left in that time period purely for tax reasons?
If the answer is ‘no-one’ then it seems this makes the case for setting tax without such fears, no?
People don’t leave their home unless they have to or have reason/desire to. It takes a hell of a lot to get people to relocate drastically if they don’t otherwise want to. I can’t see taxation being anything other than an item in the ‘for’ column when deciding this.
I strongly suspect that if you plotted the increase over the last forty years in the numbers of wealthy individuals in the UK against the quality of life of the rest of the UK population, there would be a strong negative correlation.
A similar negative correlation probably exists between the number of wealthy individuals in this country and Britain’s international standing, British security and even the wealth of the rest of the British population.
Wealthy individuals leaving Britain would be a major cause for celebration, but equally important would be ensuring that unlike Rupert Murdoch they cannot still have a massive voice in deciding how our country should be run once they have left.
The evidence from France suggests the FT is right and you are wrong
“In 1982, Francois Mitterand, the first left-wing president of France’s Fifth Republic, introduced a wealth tax that was swiftly abolished by Jacques Chirac in 1986, but reinstated two years later when Mr Mitterand was voted back in. The tax – called the ISF (impôt sur la fortune) – stayed in place until 2017 when it was abolished by current president Emmanuel Macron.
The rate was charged on individuals with a net worth over €1.3m (£1.14m), with the rate ranging from 0.5 per cent to 1.5 per cent (on assets over €10m). While it might have helped social solidarity in France, the revenue it raised was paltry. In 2015, a total of 343,000 households paid €5.22bn, an average of about €15,200 per household, according to the Financial Times. It accounted for less than 2 per cent of France’s tax receipts.
What’s more, it led to an exodus of France’s richest. More than 12,000 millionaires left France in 2016, according to research group New World Wealth. In total, they say the country experienced a net outflow of more than 60,000 millionaires between 2000 and 2016. When these people left, France lost not only the revenue generated from the wealth tax, but all the others too, including income tax and VAT.
French economist Eric Pichet estimated that the ISF ended up costing France almost twice as much revenue as it generated. In a paper published in 2008, he concluded that the ISF caused an annual fiscal shortfall of €7bn and had probably reduced gross domestic product (GDP) growth by 0.2 per cent a year. What’s more ISF fraud mainly involving an underassessment of property assets was estimated at around 28 per cent of total revenues.”
I have not proposed a wealth tax
I have suggested increasing some of the taxes paid by the wealthy to the rates paid by everyone else
So, all your arguemnts fail.
Compared with the disastrous effects of Austerity, Brexit and the other policies imposed by the millionaires that run the UK, a 0.2% reduction in GDP sounds like getting off very lightly.
The FT seems to be deliberately misrepresenting the mindset of the ultra-rich. If one’s personal income is such that one can literally afford anything one desires, then surely access to such pleasures becomes far more important than the size of one’s tax bill. Is it safe to walk the streets? Is the air clean? Can one be sure that the food one buys is high quality? Is travel easy? Are there nearby good art museums, opera productions, West End shows, Michelin-starred restaurants, etc? Will one’s children get a good education without having to board? And so on…
Why is it that there is a focus on taxation alone, when all these other considerations are just as important when it comes to the ultra-rich’s lifestyle decisions?
Because they have read microeconomics….
I don’t understand this reply, could you expand/explain it? I don’t get what you meant. Thank you.
With what I can see when moderating comments, I cannot be sure what you are asking me
Your reply was, ‘Because they have read microeconomics….’
I didn’t understand the inferred meaning. But no worries.
And micoreconomic theory is almost entirely a work of fantasy relating to a place that does not exist
Well I wonder what the FT has to say about the failure of the Greedy Thatcherism they support getting such a massive thumbs down:-
“Rishi Sunak’s approval rating is at a record low for a prime minister in modern times, according to the polling company Ipsos.”
https://www.theguardian.com/politics/live/2024/apr/18/rwanda-bill-raf-planes-grant-shapps-conservatives-labour-rishi-sunak-uk-politics-latest-updates?filterKeyEvents=false&page=with:block-6620e0198f0889f11ac74ead#block-6620e0198f0889f11ac74ead
Undoubtedly we will never hear!
It’s owned by Japanese based Nikkei – it is a business paper which means its almost bound to have such an editorial?
I suppose if it thought global corporate monopolies could threaten the long term viablity of capitalism they might be a bit more nuanced?
Its quite surpising that it does have relatively independent economic pieces – more so than most of other UK MSM
I find its articles which are usually singing from the same hymn sheet of “market perfectionism” extremely tedious almost to the point of childishness!
According to the ONS the poor pay a higher rate of indirect taxes than the rich: “Indirect taxes increased income inequality by 3.5 percentage points; the poorest fifth of people paid a greater proportion of equivalised disposable income on indirect taxes at 28.3%, compared with 9.0% for the richest fifth of people in FYE 2022.”
I wonder why they don’t just get up and leave for a tax haven somewhere?
There are some rich people who think they should be taxed more: the Patriotic Millionaires, for example. A decent Government interested in fairness would initiate a campaign to explain why fairness and equity demands that adjustments are made to certain tax rates and that various subsidies given to high earners and those with wealth will need to cease and/or reduce.
It’s a symptom of how social solidarity has been eroded by the neoliberal virus that some who already have more than enough think they deserve even more and that some “professionals” think it’s their business to help them get more.
Very good….
In the early 90s I worked at a large consulting firm. During May the P60s were issued and there was all round horror at the amount of tax taken from the salaries – except from me. I said that we should pay more, as some of this helps benefit those with very little. From the general reaction in the office you might have thought that I had suggested that people should set fire to themselves (or something suitably horrific). Others I met said that tax should be reduced to 1%. These ideas and self interested attitudes are sadly not new!
The wealth creators will not leave the working class are staying right here
It’s our country we built it !!
Which is pretty much what Biden is saying. Economies are built bottom up and middle out – not top down. Compared to Reeves and Co, Biden’s economics looks positively socialist!
True
So, if a wealthy person decides to leave the UK what actually happens to their wealth? Do they take their houses with them? Do they take other assets such a pension funds, businesses, offices, warehouses, factories, vintage cars and art collections with them? Well they may take their art collections, but doesn’t the vast majority of their wealth actually stay in the UK? Of course the can sell their assets but what then? What do they do with their cash? I assume invest it. But where?
If they do sell up (unlikely), then what – the glut of the wealthiest asset’s drive down prices here? They then stand to lose as much in asset depreciation as they would in additional taxes.
Yes, I can just about see that some wealthy people might leave; but surely the bulk of their (productive) assets don’t.
And, quite honestly, the more likely reason a wealthy person might want to leave the UK is the decline in public services, lack of policing, poor roads, air pollution, sewage in our rivers and seas, social injustice and social unrest. All caused by austerity not by higher taxes.
Is there something wrong with my (rather simple and naïve) thinking here?
You are boradly right
Their investments, properties and businesses will all most liklely stay here
Most leave to avoid inheritance tax or capital gains tax – but you’re a really sad case if yu do and mosty return as soon as they can
What strikes me most is the inferred level of power the super-wealthy have over policy.
If government are so worried they might emigrate as a result of a policy change, then they clearly represent a risk that needs to addressed regardless.
Because they could all just leave right now if they wanted.
Seems like we should focus on reducing the apparent risk by shoring up elsewhere – because the risk is only going to get even bigger…
What and where is ‘elsewhere’?
That was poorly worded by me.
I suppose the gist of my thinking is there must be multiple other ways of mitigating or reducing the risk of blunt force tax increase is so unpalatable.
Maybe a bad analogy, but the new law proposed to raise the legal age to buy cigarettes springs to mind – we recognise smoking is bad and too costly, but are also worried existing smokers won’t accept a flat out ban… so at least try and stop there being new smokers/reduce that number going forward. So perhaps like this, one area to explore could be to create policy that limits or discourages excessive wealth accumulation or addresses wealth disparity for future generations.
We could also explore incentivising the wealthy in ways beneficial to society in order for them to pay less tax. i.e. if you are a major shareholder of a business that employs UK citizens, if you increase their pay so they pay more tax (but are also better off), maybe you don’t get taxed at the high rate. This sort of thing would also create social and market pressure for them to do this. If your wealth is all invested overseas, then you get taxed more here as you are contributing less to the economy here. I obviously don’t understand economics at all so I beg you not to be too harsh and critique these specific ideas, more the essence of the point I’m making about thinking outside of the box to achieve the desired net effect.