Non-doms are good for the UK
It may seem unfair, but non-doms benefit the UK economy
It’s easy to make the argument that the tax treatment of non-domiciled UK
residents is unfair. Why should two people living next door to each other in
similar circumstances pay different amounts of tax, simply through an accident
of birth? In my view, this fairness argument is simplistic. In truth, life is
unfair, in that an accident of birth can help or hinder each one of us.
The key issue is whether the nation as a whole benefits from the rules. This
was put clearly in the 2003 background paper from the Treasury, where the issues
of fairness and competitiveness were contrasted.
In recent years, London has become the financial capital of the world. This
is partly due to over-reaction by the US to the Enron scandal, but due, at least
in part, to the welcome we have given in the UK to those who wish to bring their
enterprise, talent and money to the UK.
International businessmen and women do not have to come here there are
plenty of other countries that would welcome their contribution. Whether or not
they pay tax in the UK, the impact they make on business and employment is vast.
We meddle with this at our peril.
Even if we were to change the rules, I do not accept that it would raise any
appreciable amounts of additional tax. Firstly, of course, some individuals may
depart our shores and others will be discouraged from coming. Apart from that,
any non-doms here with wealth are likely to have it invested through existing
offshore structures so that, even if the rules were changed, the Treasury would
be likely to find collecting any tax rather like grasping for a wet bar of soap.
Over the past 30 years I recall many occasions when the non-domicile rules
have been questioned and on each occasion, after due reflection, the government
of the day has decided against making any change.
In the early 1990s the Conservative government dropped the proposals after
strong lobbying by the Greek shipping industry and, it is believed, some
personal pressure from Margaret Thatcher. If that is true, she did so with good
reason.
As a Brit I cannot benefit directly from these rules, but I would be aghast
if the government was rash enough to make a change. If it ain’t broke, don’t fix
it.
Mike Warburton is senior tax partner at Grant
Thornton