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The row about taxation of non-domiciled people in Britain

A New York billionairess was once reported to have said, to her eternal shame: “Only the little people pay taxes”. It is an attitude of mind that nicely demonstrates how, under even high-tax regimes, some people, if they have the right lawyers, smart tax planners and political connections, try or even succeed in avoiding paying as much revenue as possible, leaving those on lower incomes to pick up the tab.

Of course, the ideal solution to problems of tax avoidance by the rich is to cut taxes, drastically, across the board. And with all the current complaints about the British taxman’s crackdown on “non-domiciled” residents in the UK, it would be refreshing if those champions of capitalism like Lord (Digby) Jones, or William Rees-Mogg and the rest could acknowledge this point. I don’t mind non-doms being able to pay little tax; I hear all the arguments for why it is sensible to encourage them to live and invest in Britain. But would it not be nice if, say, the Tories could focus on what is a genuine problem: resentment by the increasingly taxed middle class of what is seen, however, mistakenly, as favourable tax treatment to very wealthy people? The solution, of course, is not to hit non-doms, but to cut taxes sharply, simplify them, and put the brakes on public spending, and then hit the reverse gear-shift.

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14 comments to The row about taxation of non-domiciled people in Britain

  • Lascaille

    Perhaps because the ‘middle class resentment’ is just the same hot air from the usual suspects in the media and their proposed solution (having everyone pay more tax) hardy resounds with the Tories?

  • windy blow

    One tax band. Everyone pays 20 per cent. That’s it, no get out clauses, no deals, no kick backs, no exemptions.

    At the same time vat rises to 20 per cent. Everyone pays that too.

    So the Governement has its necessary income, no one need worry anyone is “escaping” tataxtion and with a lower tax rate people still have more money to spend on what they choose so the economy moves forward. (I should add no stealth taxes but they are always there, always will be)

    No massive civil service (aka inland Revenue) trying to work out who gets what who pays what, no shyster acciuntants dodging payments for their rish clients.

    Would it work? Probably not in the slightest but it makes me feel better that it may – one day – be so straightforward it makes us chuckle with glee.

  • RRS

    Whilst taxation “policies” are often (too often) developed for purposes of “social” objectives (e.g., taxes on “vices,” fuel consumption) and directives of behavior, (all a serious fiscal error), the primary purpose of taxation and the driver of its levels is to provide revenues for the functions of governements (at all levels).

    Therefore, the issues of taxation of anybody and everybody cannot be adequately addressed without first determining the proper functions of governments.

    “Thot thar is the problem in a nutshell! – where it belongs.”

  • Midwesterner

    What is a “non-domiciled resident”?

  • Brendan Halfweeg

    A non-domiciled resident is a foreigner living and working in the UK, but with links to another country such that their residence of the UK is deemed temporary for tax purposes. It essentially means that income earned offshore (out of the UK) isn’t taxed by the UK government. Any foreigner who can establish non-domicile status then simply has to arrange to have part of his income appear as if it is earnt outside of the UK. It is quite lucrative from a tax minisation point of view.

  • Johnathan Pearce

    The term “non-domiciled” is also a bit open to interpretation, and you can be sure that the British tax authorities will keep making up new interpretations to catch people out. By far the worst aspect of these changes are how they damage the ability of people to financially plan their lives with any degree of certainty. That in itself sends out a terrible message to any ambitious folk coming to live here, for however short a period of time.

  • Midwesterner

    Thanks, all. Alisa, I bookmarked that article.

    Wouldn’t all the rich people go and live in Monaco or some other place that has favorable tax treatments? Seems like changing UK law would be like butchering the dairy cow for meat.

  • Seems like changing UK law would be like butchering the dairy cow for meat.

    I think you could say this about most taxation.

  • guy herbert

    They are doing. And many of the British ones do anyway. That’s because if you aren’t non-domiciled and are resident in Britain even for a fraction of a year (which fraction has got much smaller of late) then you pay taxes not on what you earn in or repatriate to Britain, but your worlwide earnings. Hence ‘tax-exiles’ who having got rich have to move abroad for long periods to enjoy their wealth.

    It is not quite as evil as the extraterritorial regime run by the US IRS for the discomfort of its citizens, but very nearly. It is profoundly weird for a country that built an Empire on overseas investments to punish its own subjects for making money abroad and coming home with it.

  • Midwesterner

    It is profoundly weird for a country that built an Empire on overseas investments to punish its own subjects for making money abroad and coming home with it.

    As it is for a country (the US) that was founded in a revolt against the ‘home’ country taxing its citizens over here to now be so strongly taxing its own citizens ‘over there’.

  • Eric

    This is one of the key problems with democracy. As most people don’t earn money in a foreign country, this is a tax they don’t have to pay. Yet another tax for “those wealthy people”.

  • Brendan Halfweeg

    Midwesterner – I thought that was partly down to taxation without representation, the fact that colonials had no representation in the British Parliament? Not just taxation itself per se.

  • Midwesterner

    It was about being taxed and governed from far away with little or no input by the taxed and governed. And now, our (US) government is not only taxing our citizens when they are ‘over there’ (somewhere else) it is most definitely governing them over there as well. Americans are expected to obey the US laws no matter what nation they are in, as the US government claims the right to have its laws enforced on US citizens everywhere in the world.

    The only real difference is that the English had colonies in which it was taxing and governing its subjects from a distance, but the US is taxing and governing its distant citizens when they are in jurisdictions that aren’t even claimed by the US to be under US authority.

    This government believes US citizens are the property of the US government. There is no other way to interpret this extension of its dominion into other countries to control ‘its’ citizens.