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The Tories' non-dom trouble Print E-mail
Written by Dr Eamonn Butler   
Wednesday, 23 April 2008

George Osborne's non-dom tax policy is now in tatters. It wasn't a bad policy, all in all, to make non-domiciled investors stump up a bit of cash to pay for the public services that they enjoy by dint of living here. The proposed burden was modest, and the policy had been tested out on the business community before it was announced. I don't think I would have proposed it (on the ground that the UK needs every investor it can get, and there are plenty of places round the planet who are willing to tear up the tax forms and welcome them in). But nobody really objected too much.

Indeed, it went down pretty well with the general public. Whereupon (unfortunately) Chancellor Alastair Darling thought that he too could stick these rich foreign investors for some cash to help fill his budget deficit – and, in haste to steal Osborne's halo and without any consultation, promptly overdid it.

So now we've had a stream of non-domiciled investors mumbling and grumbling that they might – or will – soon be leaving the country for more agreeable and lower-taxed places, like Bermuda or Switzerland, where policy is less fickle and arbitrary, and where you can plan your business for the longer term. The latest, according to reports, is Brevan Howard, a $22bn investment fund currently based in London's Pall Mall. But that's just the latest of dozens.

So at a stroke, Darling has killed off the UK's hard-won status as a buzzing international investment centre where non-dom enrepreneurs are welcome and left in peace to get on with making money for themselves and, indeed, all those Brits they work with and invest in.

To will back that status, Osborne – when Chancellor – will have to do far more than just promise a somewhat lower rate of tax. Investors' confidence in UK policy has, unfortunately, been shot away by the government's arbitrary, opportunistic attack on them. Osborne will have to say that he'll restore the status quo ante – and sign in blood that it won't change again during his term of office – before the big fund managers will think about returning.

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written by Dr Andrew Johnston, April 23, 2008
This piece assumes that Non-Doms are only interested in locating somewhere where their marginal rate of tax is zero. Why are you assuming that these individuals are attracted to the UK just because of the tax regime here. They might enjoy the fact that living in a world city such as London provides them with a huge number of facilities, i.e. entertainment, culture and allows them to mingle with the entrepreneurs/financiers/business people already located there. Does Switzerland or Bermuda offer such non-pecuniary advantages?

The argument here is that they provide jobs and investment to the UK economy - but my argument is that being located in the UK also provides them with advantages. Therefore, why do we believe that a change in the tax regime is such a big disincentive to remain here?

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