It’s 28 days until the General Election and Ed Miliband is really warming to his ‘standing up for the little guy’ theme. His latest plan? To get rid of the controversial non-dom tax status.
More than 110,000 UK residents are non-doms, meaning they can cite another country as their real domicile and will only pay tax on overseas earnings if they bring the money back here. Big cheese non-doms, who are usually born abroad or have a foreign father or grandfather (showing its 200-year-old age there), include Britain’s wealthiest man Lakshmi Mittal and Chelsea owner Roman Abramovich.
Daily Mail baron and lifelong Brit Jonathan Harmsworth (aka Viscount Rothermere) inherited the status, designed to shield colonial exporters from levies until their ships docked in Britain, from his Paris tax exile father and allegedly diverts his income through a Bermudan company.
‘I just don’t believe the way we compete in the world is as an offshore tax haven,’ Miliband will say in a speech at Warwick University later today. ‘I want to be clear. I don't blame people for taking advantage of non-dom status. I blame governments for fostering a system that can be taken advantage of.’
That of course includes the previous Labour government, which introduced a £30,000 a year charge for non-doms who had lived in the UK for seven out of the previous 10 years. In December’s Autumn Statement, chancellor George Osborne announced that annual fee would go up to £90,000 a year for anyone who had lived here for 17 of past 20 years – still peanuts for most non-doms.
In the end, both Labour and the Coalition decided that they risked losing more in tax by ditching the status. And that’s left an opportunity for Miliband to once again present himself as fighting the corner of ordinary people, riding on the wave of disgust provoked by the revelation HSBC’s Swiss private bank had helped wealthy clients evade tax through ingenious methods such as stuffing briefcases with cash.
The question, though, is whether ditching the non-dom status will actually provoke a mass exodus of Russian oligarchs, Greek shipping magnates and hedge fund tycoons – and lose the British economy their largesse and the government their tax revenue on UK earnings. Shadow chancellor Ed Balls claimed today it could raise ‘hundreds of millions of pounds,’ but left himself a get-out clause by adding it was, ‘very uncertain because we do not know how much income [non-doms] have in this country.’
And yet more evidence Labour didn’t bother doing their sums this time round, or ignored them, comes from this video of Balls in January saying abolishing the status would end up costing the UK money.
No doubt many of the super wealthy will find increasingly Byzantine ways to shield their billions and avoid paying tax, and some will flee for their Swiss chalets or Caribbean beach mansions. But a substantial number probably like London far too much to leave. And scrapping non-dom status would also bring the UK into line with most of the rest of the world – remember Boris Johnson finally giving up his US citizenship recently when the IRS came knocking?
The unlikely hero of all of this is Duncan Bannatyne, who has been arguing against the non-dom status enjoyed by fellow former Dragons James Caan and Doug Richard, for years now.
Ed Milliband says he will abolish non-dom status in UK. This gets my vote I never thought any party would have courage to do this.— Duncan Bannatyne (@DuncanBannatyne) April 7, 2015
The policy may lose the UK money. But starting to address the perception that the wealthy play by their own rules could well help tackle the enormous mistrust of wealth creation, and business in general. And, perhaps most importantly, it’s hard to argue that the uber-rich enjoying their Mayfair mansions and Harrods hampers shouldn’t pay more for the privilege.