Tax the Rich!

Lib Dems argue that, by rewarding non-doms for keeping their investments abroad, the current tax rules massively harm our economy.

There was one thing conspicuously missing from the Autumn Statement and that was the failure to tackle the issue of Non-doms. Non-domiciled residents in the UK receive at least £10.9 billion in offshore income and capital gains each year, which they are not required to report to HMRC or pay tax on in the UK. Taxing this income would raise more than £3.2 billion in additional tax revenue each year and also remove the current disincentive to invest in the UK. Refuting concerns that abolishing non-dom status could lead to a mass exodus from the UK, researchers calculate that only 0.3% of those affected would leave the country (fewer than 100 people), most of whom are paying hardly any tax under the current regime. These findings come from new research which gained unprecedented access to the anonymised tax records of the UK's non-doms. The study, by researchers from the University of Warwick and The LSE, analysed the anonymised personal tax returns of everyone who claimed non-dom status for tax purposes between 1997 and 2018. The researchers used evidence from reforms to the non-dom rules in 2017 to estimate how many non-doms would leave the UK as a result of abolishing the regime altogether or restricting it based on number of years residence.

Non-doms are individuals who are resident in the UK, but who claim on their tax return that their permanent home ('domicile') is abroad. Under rules originating from Britain's colonial history, this entitles them to claim special tax treatment not available to ordinary taxpayers even though they may spend most of their time in the UK and have lived here for several years. Unlike other UK residents, non-doms can avoid paying tax on their investments by locating them offshore.

The current regime saves them more than £125,000 on average in income tax and capital gains tax each year. This figure already accounts for the alternative tax planning options a wealthy individual would pursue if non-dom status were not available.

Lib Dems stand for tax justice which does more than lip-service to the principle that those with the broadest shoulders should bear more of the burden. While almost everyone who works hard for their income will pay more tax, many of the truly wealthy are paying almost nothing.

Notes:

Arun Advani, Associate Professor at the University of Warwick's Economics Department and CAGE Research Centre, said: "Historically, arguments against

abolition of the non-dom regime rested on uncertainty about whether it would raise any money. It's now plain to see that it does, so supporters of the status quo need to find a new case for its defence."

David Burgherr, Research Officer at LSE's International Inequalities Institute (III), said: "Some of the richest non-doms actually reported the lowest levels of UK income. One in sixteen report no UK income at all, but on average earned more than £450,000 a year abroad, all without having to pay any tax in the UK."

Andy Summers, Associate Professor at LSE Law School and III, said: "Non-doms receive ten times as much investment income offshore as they report in the UK. By rewarding non-doms for keeping their investments abroad, the current tax rules harm our economy as well as being unfair on ordinary taxpayers who must pay tax on their worldwide income."

One in five bankers claims non-dom tax status!