Under the non-domicile rule, those with a permanent home abroad currently do not have to pay UK tax on overseas earnings. Only their UK income is taxed, although they have to pay £30,000 a year to the government after seven years.
But Labour leader Ed Miliband wants to get rid of this rule, and in doing so hopes to raise “hundreds of millions” for the Treasury. If Labour wins the General Election next month, many of the City's biggest names will be required to fork up considerable extra sums in tax.
HSBC chief executive Stuart Gulliver, who has non-dom status after living in Hong Kong, would be affected, as would Richard Gnodde and Ross McEwan, heads of Goldman Sachs International and RBS, respectively.
According to The Sunday Times, Bank of England governor Mark Carney would also suffer under the plans, since he is Canadian. Carney earns £874,000 each year in pay and benefits.
The Bank of England has come to Carney's defence, saying his non-dom status was “not a choice” but rather the “straightforward outcome of the tests that determine domicile status in the UK”.
“The governor pays full UK taxes on all earnings, including his housing allowance,” it continued.
A major counterargument to the new rule is that it could make the City a less attractive place for foreign businesses and executives.