GOVERNMENT plans for a crackdown on “non-doms” could hit Britain’s economic recovery and cause an exodus of wealth creators from the City, tax experts warned yesterday.
Chancellor George Osborne is considering plans to introduce a flat-rate levy for the 120,000 non-doms – people residing in the UK, but not domiciled here to avoid paying UK tax on their foreign earnings – in an extension of a punitive tax regime introduced by former Prime Minister Gordon Brown.
International mobility partner at PricewaterhouseCoopers Sean Drury said: “If we reduce the tax benefits for foreign nationals working in the UK, they’re going to think twice about coming here. There is a risk – if there is a large outflow of non-doms – that actually the tax take would reduce.”
He added: “This is yet another round of discussions around non-dom taxation. The community is looking for a settled regime in order to make long term decisions about location.”
The crackdown on the super rich comes as the government plans “investor visas” to make it easier for multimillionaire foreigners to live and invest in Britain.
Drury warned the changes sent “conflicting messages” to wealthy businessmen, which could reduce Britain’s status as an attractive destination for international investors.
Gordon Brown introduced a £30,000 annual charge for non-doms who have lived in Britain for seven years or more in 2007.
However, the levy has been seen as a failure after it raised only £162m and resulted in 16,000 rich businessmen leaving the country.
In opposition, George Osborne advocated a levy of £25,000 per year for all non-doms in order to raise as much as £3.5bn for the Treasury.
Any attempt to impose a new, stricter regime would hit high profile non-doms, including Conservative party donor Lord Ashcroft.
Harsher charges could however help coalition plans for an increase in the basic income tax threshold, in a development that would be seen as a win for the Liberal Democrats.
Nick Clegg’s party campaigned at the general election to raise the basic income tax threshold to £10,000 and has also called for non-dom tax loopholes to be closed.
The Treasury estimates it will receive £350m for the last tax year from non-doms under the present regime. This is on top of the approximately £4bn the Treasury already receives in UK income tax each year.