The City of London, the heart of finance in the UK, is preparing to up and leave the country. Well many of their number certainly are. And very soon. These people, referred to in the UK as “non-doms,” are beating a swift retreat from our island. The government eagerly awaits the introduction of a £30,000 yearly levy on anyone who has claimed non-domicile status as a UK resident for more than seven years. There are believed to be roughly 116,000 non-doms currently living in the UK.
The British government estimates that the new levy will raise £800 million annually for the Treasury. That is, of course, if any of the non-doms stick around long enough to pay the levy. Over half in a recent poll said they were leaving the UK before the April introduction of the tax.
So perturbed are some of the financiers in the City of London that they are actively wondering if the UK government really wants the business in their country. These men and women of money are balking at the idea of paying for the privilege of living in the UK and working in the City.
Americans are most affected by this charge because they will not be able to offset the fixed charge against their US taxes. Considering the current exchange rate, a $60,000 levy a year per person to stay in London is making for quite an exodus. Per person.
So worried are the City that Sir Digby Jones, former head of the Confederation of British Industry and member of Gordon Brown’s government, has questioned the tax and called for it to be scrapped. The Trade & Industry Secretary’s call has angered Labour’s paymasters in the unions who, in their unreconstructed socialist way, welcome the new tax. One has to wonder if Sir Jones will be able to remain in government should this legislation go through.
“A recent poll of advisers to wealthy clients showed that half of them were considering leaving the UK in response to the tax crackdown.”
Under Tony Blair’s leadership and premiership British government was relatively friendly to business bar the increasing regulation imposed due in part to European diktats. It seems that Gordon Brown is looking to the 1970s “Old Labour” playbook for ways of covering the increasingly wobbly UK finances. Targeting the City has always been a favorite of the unreconstructed socialist left who play on class warfare and envy.
The fact the levy will undermine London’s role as a chief financial center for Europe does not seem to bother those who are keen on this tax. They do not seem to realize or care that one of the reasons for the City of London’s continued success in the light of the changes in modern finance is its friendly tax regime for non-doms. This “loophole” needs to be closed and damn the consequences.
The non-dom flight will have knock-on effects throughout the UK economy; not the least in the property market which is already looking shaky thanks to the worldwide debt worries and the effective failure of Northern Rock. Many wonder aloud why Gordon Brown would introduce this tax legislation in the light of the obviously slowing British economy. The credit crunch will only be increased if a large number of the wealthy leave the UK taking their money with them.
In a recent report on the BBC, City folk were heard to remark that Monaco was a lot warmer than London.
It is unclear at this point if the government will succumb to the pressure that is being brought to bear on it by business and those who work in the City. The legislation clearly marks a bad sign in Britain’s friendliness to international capital and those who work in its industry.
Jonathan Taylor, director general of the London Investment Banking Association, said: “The more senior you go, the more prevalent foreigners are. In some large firms, 60pc of people in senior executive functions are non-British.
“Our concern as employers is our ability to attract and retain the staff essential to the health of London as an international financial centre.”
William Cash of the Business magazines reports the following about the panic surrounding this new tax, proposed only a few months before the introduction in April, 2008.
“The provisions will seek to tax people on historic gains made investing in Britain and elsewhere. Non-UK gains remitted to Britain will be taxable, regardless of the £30,000 payment – effective immediately. The burden will be on the remitter to prove there are no gains in any capital remitted, a serious accounting exercise and absolutely no fun for anybody. Beneficiaries of offshore trusts, meanwhile, will be asked to pay capital gains tax on distributions whether remitted to Britain or not.”
We will all have to wait to see if the “monied” flight will be as bad as it is predicted to be. The high cost of living in London, the increasing transport problems in London and other costs are already driving foreign Londoners away. This tax on those who are non-doms will just increase the flight of international residents out of the UK’s capital .
It will be a good spring for the moving men it seems.
Andrew Ian Dodge blogs at Dodgeblogium.