THE CURRENT TAX REGIME for foreigners is confusing and the government is sending out conflicting messages.
On one hand, we have the system of non-domicile with the benefits of not paying inheritance tax on all estate (only the UK assets); we have a system where we invite wealthy foreigners to the UK with the promise of a speedy and automatic citizenship process while still benefiting from the non-domicile regime; and we still have the system where foreigners can buy property through offshore trusts, thus avoiding stamp duties and so on.
On the other hand, we have hard-working UK business people who cannot afford any of the above and who pay the full tax rate. Ordinary business people, especially people operating SMEs, need to be persuaded that the tax regime for foreigners is beneficial to the UK economy – in short a British person running a business in the UK will probably end up paying more tax than a foreign person running a business in the UK.
But even if we accept that it is fair (and this could well be another discussion), one thing is absolutely clear: the tax regime for foreigners is confusing and conflicting, and this creates loopholes – and we can’t blame the foreigners who exploit these loop holes. So maybe the chancellor should make a rational economic analysis because most other advanced economies do not offer these tax benefits to foreigners (as far as I understand the US, Germany or Australia do not do so, and presumably do not need incentives to attract foreigners to invest in their economies).
So my ideas for the chancellor for this week’s Statement are straightforward: simplify the tax system by taxing foreigners in exactly the same way as UK business people are taxed.
Henry Ejdelbaum is managing director of AIMS Accountants for Business
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