الخميس , يونيو 18 2020

Labour would scrap 'non-dom' status

City of London skyline

A Labour government would abolish the non-domicile rule that allows some wealthy UK residents to limit the tax paid on earnings outside the country.

Ed Miliband will say non-dom status is a symbol of tax avoidance and “makes Britain an offshore tax haven”.

Labour says it is “uncertain” how much money the move would raise, which would affect an estimated 115,000 people.

The Conservatives said the number of non-doms “exploded” under Labour and the move could reduce tax revenues.

In other election news:

  • The Conservatives will pledge resits for pupils with poor Sats tests results at the end of primary school
  • In a leaders debate in Scotland, SNP leader Nicola Sturgeon said she would work with Labour to keep David Cameron out of power
  • One hundred young voters grilled representatives of the main parties for BBC Radio 1 Newsbeat
  • 140 senior doctors sign a letter in the Guardian suggesting the NHS is “withering away” and privatisation is threatening services
  • The Lib Dems will pledge a £100m prize fund for car makers to create low-emission vehicles as Miriam Gonzalez Durantez, Nick Clegg’s wife, is set to join the campaign trail
  • UKIP leader Nigel Farage challenged former Labour PM Tony Blair to a debate “any night between now and the election”
  • The English Democrats to launch their election campaign

There are an estimated 115,000 so-called “non-doms” in Britain.

Famous examples include Chelsea owner Roman Abramovich, while former Conservative deputy chairman Lord Ashcroft gave up the status in 2010 to keep his place in the House of Lords after a change of law.

Some Labour supporters including businessman Sir Gulam Noon also had non-dom status in the past.

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Analysis by Iain Watson, BBC political correspondent

Chancellor's red box

The last Labour government toyed with abolishing the non-dom system but simply tightened the rules instead – which were then tightened further by Conservative Chancellor George Osborne.

That is because non-doms still have to pay tax on their UK earnings so successive governments have calculated that, on balance, it is better to have them here making a contribution to the exchequer than to see them flee abroad.

But as many countries do not operate a similar system, Ed Miliband believes the vast majority of non-doms would opt to stay and that the exchequer could gain hundreds of millions of pounds.

Politically the new policy is seen as a symbol of his party’s determination that high earners should pay their fair share.

But critics will argue it is further proof Labour is seeking to appeal to its core vote at the expense of attracting wealthy entrepreneurs and investors to the UK – and if too many non-doms do leave as a result, the Treasury could lose rather than gain.

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To qualify, a person is usually either born overseas, has a parent who was born abroad, or has substantial assets outside the UK.

In his Autumn Statement in December, Chancellor George Osborne announced a new £90,000 charge for people who are non-domiciled in the UK for tax purposes but have lived there for 17 of the past 20 years.

tax

Policy guide: Where the parties stand

The previous Labour government introduced a £30,000 charge for people resident in the UK for seven of the previous 10 years but who were non-domiciled for tax purposes. The Liberal Democrats have pledged to increase non-dom charges.

‘Not rigorous’

In a speech at the University of Warwick, Mr Miliband will say scrapping non-dom status will be a manifesto pledge for Labour.

The Labour leader will argue it has become a symbol of tax avoidance and in practice little proof is required to show that the beneficiaries are not domiciled in the UK.

He will say: “There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain, like you and me, but aren’t required to pay taxes like you and me because they take advantage of what has become an increasingly arcane 200-year-old loophole.”

The tests applied are “not very rigorous”, he will say, adding: “I want to be clear. I don’t blame people for taking advantage of non-dom status.

“I blame governments for fostering a system that can be taken advantage of.”

‘Arcane’

Shadow chancellor Ed Balls said existing “arcane” rules were being abused, allowing “a small number of very wealthy people” to reduce their tax.

He told BBC Breakfast that the clampdown could raise at least “hundreds of millions of pounds”, but he added: “Of course it is very uncertain because we do not know how much income people have in this country, people who aren’t paying tax in the same way as everyone else.”

The plans won the backing of businessman Duncan Bannatyne, who last week signed a letter backing the Conservatives’ economic approach.

On Twitter, Mr Bannatyne said: “This gets my vote I never thought any party would have courage to do this.”

Conservative chief whip Michael Gove suggested Labour had been “incapable” of saying how much the policy would raise for the Treasury and the move could lead to “a flight of talent and capital” abroad.

Speaking on Newsnight, he said: “I am interested in taxation policy that genuinely makes sure that those people who do have more can effectively be taxed so that we can get the maximum out of them in the most effective way.”

A Conservative Party spokesman said: “We’ve increased the non-dom levy and cracked down on wealthy foreigners who avoid tax by ensuring they now pay stamp duty on their properties.”

But BBC assistant political editor Norman Smith said it was notable that neither the Conservatives nor the Lib Dems were opposing the move outright.

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