Ed Miliband has said that if he wins the election he will scrap non-dom tax status. Mark Pearce (pictured), a partner on the tax team at law firm Thomas Eggar, comments…
Simply abolishing the non-dom rule would be a disaster for the UK economy as it would inevitably lead to a mass exodus of wealth and talent from the UK. It allows people to come and work in the UK, pay UK tax on their UK earnings but shelter their offshore wealth from UK tax unless that wealth is brought into the UK.
Rather than raise tax revenues, abolishing the rule would see skilled migrants move to other, lower tax jurisdictions. This would deny the UK millions of pounds of tax that these people currently pay, as well as indirect financial contributions through VAT and stamp duty they pay when purchasing goods or properties in this country.
In an election that is dominated by tax issues, politicians are making sensationalist comments for column inches without giving true thought to the consequences of their stated position. A carte blanche abolition of the non-dom rule would lead to lower tax revenues, a decreased pool of migrant talent for UK employers and an exodus of wealthy individuals from the UK. People who currently contribute millions of pounds to UK society as well as significant, indirect contributions to the UK economy and UK causes will leave rather than face such an unfair regime.
