Non-domicile Tax Status

Stewart Hosie Excerpts

Tuesday 31st January 2023 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I will happily bear that in mind, Madam Deputy Speaker. The Minister said that she wanted talent and investment to come to the UK. I think that sorting out the inordinate visa costs and upfront health costs to allow talented people to come here would be rather more effective than allowing a tiny number of very wealthy people to shelter earnings offshore. She also prayed in aid the Budget to justify the arguments she was making, but at the time of the Budget, the Office for Budget Responsibility assessed that by 2027-28 the Government would barely meet its own new public sector net debt target—I think it was by 0.3% of GDP, or £9.2 billion, which is hardly a ringing endorsement.

The issue of those who are non-domiciled, or non-doms, is of long standing. It turns out that the system has been with us since the 18th century—1799—and was designed to allow people with foreign property to shelter that property, and the income from it, from wartime taxes. Instead of being unwound over the years, the system spiralled to the point that by about 2007-08, 140,000 people were using it. Even in 2021, close to 70,000 people in the UK still had non-dom status. Of course being a non-dom isn’t for everybody. It would be great to have the Prime Minister explain, on behalf of all the other near billionaires, the burdens that must be borne when sheltering so much income overseas and away from the prying eyes of the taxman.

So who is the system for? The enlightening report from Warwick University in April 2022 told us that 30% of all people earning more than £5 million a year claimed non-dom status, compared with 0.3% of the population earning less than £100,000. Most non-doms live in and around London. Indeed, more than one in 10 adults in Kensington and the Cities of London and Westminster are or were non-doms. That presumably explains why, in 2015, when changes were proposed, the then Mayor of London—now the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) and discredited former Prime Minister—described them as being part of an “anti-London agenda”. I would describe them as part of a tax fairness agenda, but, for Tories, paying tax without a fight is not really to be countenanced. I do wonder if there is not a recently retired Tory chairman who might like to give a TED talk to explain how easy it is to be careless when one owes the taxman some money.

I suppose the questions that we should be grappling with are: how much would abolition generate, and how much is currently being lost in tax yield by the Treasury? Those questions have also been around for some time. In an assessment made by Richard Murphy in 2007, it was about £4 billion. In an assessment made in 2015, it was also about £4 billion. It is true that they said that behavioural changes such as becoming non-resident could cut that yield to about £1 billion. Last year, the London School of Economics suggested that the figure could be about £3 billion. Those variances alone justify supporting the motion to ask for the data to be published.

Before I move on, it is worth noting that the politics surrounding this issue have also never been far from the surface. In the run-up to the 2015 election, the then Chancellor, George Osborne, claimed Labour’s plans were merely “tinkering round the edges”. At the same time, it was suggested that Labour’s modest plans were designed to win back SNP voters. Given that the SNP-Labour result in 2015 was 56-1, that was not a very successful plan. However, that spat did illuminate the then Labour leader, the right hon. Member for Doncaster North (Edward Miliband), suggesting that the reforms could still raise

“hundreds of millions pounds”.

While dismissing fears of an exodus of wealth—that seemed to be confirmed by the last LSE report—he suggested that it was morally right to stop the UK operating as a “tax haven”. On that, he was absolutely right. What is odd, though, is that after the election, that same George Osborne did abolish permanent non-dom status. As I think he said, it was preposterous that some families had seen that tax perk handed down through three generations. On that, he was absolutely right.

Let me bring the story up to date. On 18 November last year, the current Chancellor said that axing non-dom status would be the “wrong thing to do”. Again siding with the London based mega-wealthy, he defended resisting the moves to force the super-rich in the UK who pay no tax on their offshore income to shoulder more of the burden. Bizarrely, he actually said that

“non-doms are good for the economy”.

However, by 23 November—less than a week later—it was reported that the door was open and the Chancellor had looked again at the possible abolition of non-dom status.

It is pretty clear that the Government’s policy on non-doms is at best confused. If one were a cynic, given how many very wealthy people have benefited from such an arrangement, one might suggest that it is deliberately opaque. That is another reason to publish the data requested in the motion. If, however, I was being generous, I would concede that the number of non-doms is falling and that the anticipated yield from abolition is genuinely unclear: it is anywhere from £3 billion to £4 billion down to £1 billion, or possibly even the hundreds of millions suggested by the right hon. Member for Doncaster North. We also know that there would have to be exemptions. No one would expect to see foreign students taxed on their overseas earnings while they studied here for a small number of years.

But that is not really the issue, is it? It is about tax fairness. Why should ordinary taxpayers in the UK, even very wealthy ones, who pay their tax through pay-as-you-earn or after an annual return, or who are taxed on their dividends or their pensions, and, with I am sure a few exceptions, pay their dues on time and in full, while the super-rich, the euphemistically titled “economically mobile”, are allowed to dodge tax on the basis of a claimed association with another tax regime when they could have lived permanently in the UK for 15 out of the last 20 years?

Whether the yield is hundreds of millions of pounds, £1 billion, £3 billion, £3.2 billion, £4 billion or more, finally abolishing non-dom status is simply the right thing to do, particularly for those people who for all intents and purposes permanently reside here.