We will all pay the price for Labour’s war on wealth
There is an oft-repeated, and by now inevitably somewhat clichéd, line from Ernest Hemingway’s The Sun Also Rises, in which he wrote that bankruptcy first happens slowly and then all at once. I hope then that readers will forgive me for using it here, but it seems to me to be an incredibly apt way of describing the trend in wealth creators leaving the UK.
The number of millionaires making their way to more favourable tax jurisdictions has been fluctuating since the financial crash, but now the UK is expected to lose the greatest proportion of millionaires in the world by the end of this parliament. Non-doms were already gradually moving, but by all accounts a substantial number of those remaining are now planning to flee. Slowly, and then all at once indeed.
I should hardly need to explain why this is calamitous for the economy, but the Government clearly needs a reminder. The disproportionate amount of business activity they create here aside, the taxes they contribute are integral to the Government’s ability to fund its spending commitments, whether it’s welfare or public services. The top 1 per cent pay almost 30 per cent of income tax.
The number of liquid millionaires who left last year was the equivalent of over half a million average taxpayers leaving. Considering that these ordinary taxpayers are already being squeezed to pay for the state’s spending, this is clearly a disaster.
It’s easy to see what this exodus is in response to: the sense that the UK has become increasingly anti-business and anti-wealth. The latest increase in employers’ National Insurance and the incoming Employment Rights Bill will only have entrenched this view. And so they’re heading to places that actively court high-net-worth individuals, such as Italy, which offers a flat tax, or the UAE, where there is no inheritance tax, capital gains tax or income tax.
But of course it’s the abolition of the non-dom status that is the final nail in the coffin for our non-doms. The Treasury will now be able to levy significant rates of tax on their assets and businesses abroad. They might as well erect a massive “Get Lost” sign.
This new regime already looked pretty bad. But it appears that the situation is a lot worse than we previously thought.
The Adam Smith Institute has consulted with legal experts, financial advisors and accountants, and it has become clear that the Finance Bill as currently drafted has created a punitive and arbitrary set of rules, which will almost certainly drive away the final few remaining non-doms.
The way the rules have been designed may result in non-doms being forced to pay genuinely excessive rates of tax, especially if, as planned, the Bill dismantles the safeguard that prevented a UK resident’s profits from a foreign company from being treated as personal income.
It also seems that there is significant legal uncertainty around the Temporary Repatriation Facility, which is supposed to encourage them to move their assets here.
Their full findings will be released next week – and I’ve been told they make for grim reading.
It is not clear why the Government is pressing ahead with these plans. Perhaps, as their most ardent detractors would accuse them of, they want to punish wealth-creators for what they see as their “unfair” success. Or perhaps they genuinely believe that this will actually raise more money for the Treasury.
But either way, it will ultimately be the average taxpayer in this country who will pay the price for Labour’s war on wealth-creators. When wealth leaves the country, those who are left behind will inevitably see their taxes increase to pay for state spending.
After all, as the great Mrs Thatcher once said, there is no such thing as public money, there is only taxpayers’ money.
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