Markets are forward looking, d'ye see?

No, we are not about to make a claim about the revenue from any changes in the non-dom taxation system. We are though going to insist on how the effects of any changes should be measured:

Labour’s plans for a £2bn tax raid on non-doms are already putting off wealthy foreigners from coming to Britain, international lawyers have warned.

Tax lawyers working with billionaires and multi-millionaires have already noticed a “substantial” drop in interest from overseas clients in coming to the UK, according to Withers.

Labour has long warned that it plans to change the scheme, which allows foreigners to live in the UK without paying tax on their overseas income for up to 15 years.

The party, which is 20 points ahead in the polls, initially said it would abolish the non-dom tax status. However, shadow business secretary Jonathan Reynolds earlier this week suggested Labour would instead “modernise” it and make it less generous.

As we say, we’re not about to insist on any particular fiscal outcome from these changes. We have our suspicions of course - expectations even - about lower overall revenue but those aren’t proofs.

What we do want to insist upon though is how any effects need to be measured once the deed is done. For, as we can see, markets are forward looking. People are making decisions now on what they expect to happen in the future. Thus those expectations of future changes move the reaction back in time to now. So, when measuring the effects of the changes we do not - both should and cannot - start from the time of the actual changes themselves. Rather, we must start from when those changes became likely and therefore affected behaviour.

That is, any calculations of the yield from changes in non-dom taxation need to start a year or two back from today, not from when those changes are actually enacted, nor the tax year in which they first apply. Not because of anything that’s either good or bad about changes in non-dom taxation. But because that’s the only way we’ll be able to measure the effects of those changes upon revenue.