George Osborne wants to clamp down on non-doms in his July Budget, a move which could raise £5bn by cutting tax evasion and aggressive tax avoidance.
In a political statement suggesting the rich will shoulder some of the burden of deficit reduction, the chancellor is planning to increase annual penalties paid by those with non-dom status and tackle abuses in the sector.
The non-domicile rule allows some UK residents to limit the tax paid on foreign earnings. These tax privileges exist for people whose permanent home elsewhere.
When Ed Miliband proposed scrapping the 200-year-old non-domicile rule before the election, Osborne reportedly said he would look at big reforms short of abolishing the status.
Many tax experts are sceptical about whether changing the rules would raise significant sums for the Treasury, with some suggesting it could actually lose revenue. Non-doms are likely to respond to severe changes by making themselves “non-resident” in the eyes of the law.
It is likely this is a political move that will offset criticism over emphasis on cutting the deficit and the effects it could have on poorer members of society, especially through welfare reform.
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