{"id":6785,"date":"2010-05-09T23:07:50","date_gmt":"2010-05-09T21:07:50","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/2010\/05\/09\/time-for-a-passport-tax\/"},"modified":"2011-10-20T07:28:44","modified_gmt":"2011-10-20T06:28:44","slug":"time-for-a-passport-tax","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2010\/05\/09\/time-for-a-passport-tax\/","title":{"rendered":"Time for a ‘passport tax’?"},"content":{"rendered":"

As readers of this blog will know I have for some time<\/a> proposed a 'passport tax\u2019. As I have said previously:<\/p>\n

The principle is simple: if you have the passport you pay tax on your worldwide income unless tax resident in a state with a full double tax agreement with the UK (which is why we should give them sparingly) .<\/p>\n

To give up the passport you would have to break all ties with the UK \u2014 including any right to return. OK, European cooperation would be needed on that, but I don\u2019t see it as being hard to secure.<\/p><\/blockquote>\n

I note that this weekend the Telegraph suggested<\/a>:<\/p>\n

A new 'citizenship tax\u2019 for all British passport holders \u2014 including expatriates \u2014 could help a hung Parliament ease ballooning budget deficits without hurting most voters, accountants claim.<\/p>\n

They say Britain may\u00a0 follow the American Internal Revenue Service example and require every citizen to file tax returns regardless of their country of residence.<\/p>\n

Following [the] inconclusive general election result, this option could appeal to a coalition government\u00a0 desperate to balance the books. It would raise substantial extra revenue without costing\u00a0 existing taxpayers a single penny more.<\/p>\n

However, expatriates who currently pay little or no tax to HM Revenue & Customs (HMRC) could soon find that retaining their passport would cost much more than its current \u00a377.50 issue price. Now that nearly one in 10 British citizens lives overseas \u2014 that\u2019s a total of 5.5m expatriates \u2014 the new levy could be worth billions.<\/p><\/blockquote>\n

As they add:<\/p>\n

Funnily enough, the first man to tell me that Britain might follow the American example of a citizen tax hastily emphasised that his name must not be linked to it. Without wishing to compromise his confidentiality, it\u2019s fair to say his international private bank earns part of its profits by advising wealthy globe-trotters on how to avoid tax.<\/p><\/blockquote>\n

I have a strong suspicion I know who that person is. I also know that if I\u2019m right he\u2019s very familiar with my thinking and is no doubt reiterating it.<\/p>\n

He\u2019s also in that case right to know that it would raise a significant sum \u2014 we both have good reason for thinking it would. Which, rather perversely is why it has not happened, yet.<\/p>\n

Might it? Some suggested not. For example:<\/p>\n

Richard Mannion of accountants Smith & Williamson<\/a> said: \u201cClearly the government is going to need to find extra taxes in the foreseeable future \u2014 so nothing is off limits. This system seems to work well for the USA and is regarded by Americans as the price to be paid for the green card.<\/p>\n

\u201cHowever in view of the lack of experienced staff in HMRC I do have real doubts about their ability to police any new system like this.\u201d<\/p><\/blockquote>\n

Others sought to express similar doubt. They're wrong to do so. This could work very well.<\/p>\n

First, note no one living in Europe would be subject to it. I suspect that would have to go without saying.<\/p>\n

Second, I think there would be a \u201cwhite list\u201d of states to which it would not apply. Like the US and other major states such as Japan, Australia, Canada and so on where the tax system is considered robust, information exchange is good and double tax treaties work.<\/p>\n

Thirdly I\u2019d propose it applied to no one earning less than the income tax higher rate tax band \u2014 so taking all working voluntarily overseas, for aid agencies and the like right out of the charge.\u00a0 This replicates a US provision.<\/p>\n

After that you\u2019re left with the cases you want to tackle: those living in states with no tax agreement with the UK, with UK citizenship and\u00a0 wanting to retain it and with substantial potential tax being avoided by their residence abroad \u2014 probably in a tax haven.<\/p>\n

Yes they'll squeal and the Crown Dependencies will say this is unjust as they\u2019re not UK citizens \u2014 which I\u2019d agree for those with genuine claim to be local (which is rigorously defined, remember in the case of Jersey and Guernsey at least). But the reality is that this will massively clamp down on tax abusers.<\/p>\n

And who better to pick up the pain right now.<\/p>\n

My 'colleague\u2019 who might have been talking to the Telegraph has a conscience I think. My guess is that\u2019s why he\u2019s been talking. He knows that this is just. Precisely because it could bring in billions now that we need them at no cost to the honest people of the UK.<\/p>\n

Bring it on, as I think some say.<\/p>\n","protected":false},"excerpt":{"rendered":"

As readers of this blog will know I have for some time proposed a ‘passport tax\u2019. As I have said previously: The principle is simple:
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