It’s the economy, stupid

Hansard, 12 July 2007, Col. 1605, records the recent exchange in Parliament on the progress with the 2003 consultation document on the taxation of foreign domiciliairies. Shock, horror; the answer is there is no progress. Whilst not entirely unexpected, this could be a shame given that the recent round of media attention on the issue, whilst often inaccurate and lacking in substance, might have served to bring the matter to a head, produced some high quality debate and given the opportunity for the "new" government to remove any uncertainty at a time when many foreigners in London (well, many high earning, and high spending, City types anyway) already have one eye on the prospect of heading to Manhattan post 01.20.2009.

What this latest parliamentary exchange tells us is that the view of the new administration is that which favours the economic argument as opposed to any other, such as those based on justice or fairness (whatever they might be).

Jane Kennedy (the poor soul with the job of being the "new" Dawn Primarolo) reports that UK resident but non-UK domiciled individuals pay £3bn in UK tax, on what is an annual UK source income of around £10bn. Not that it matters much in the context of any wider debate but, with the majority of this UK source income likely to be in the form of UK derived earnings, one supposes that there could well be a further, and not inconsiderable, sum of NIC to add to this £3bn. Given that many of the high earning non-doms are in the UK on HSMP and similar visas, which prohibit the individuals from the enjoyment of UK state benefits, it might nevertheless be polite to acknowledge how much their employers are paying towards to our welfare coffers.

There is no mention of any estimate of the UK tax not paid (lawfully, or otherwise) by the UK resident non-doms, except that, tellingly, in our view, there is a statement that no attempt is made to quantify the extra tax which could be collected if the remittance basis was abolished. Does this mean, as many commentators have suggested over the years, that the tax non-doms pay, or do not pay, in the UK really doesn't matter to the government when compared to what else they bring to the UK in the way of investment and spending. After all, until Al Fayed got too stroppy, no one saw fit to question passporting and would anyone seriously suggest that, by whatever new name and by whatever new means, forward agreements are still not struck for the likes of the Boris Berezovsky, who is rumoured to spend £50m in the UK every year, and that is just on his security services.

So, we appear, for the timebeing, to be sticking with the policy approach that has prevailed for the past couple of decades; being the policy founded on the economic risk argument that the UK cannot afford to take the chance on losing the foreign money it already has, must attract more money, must remain internationally competitive and must keep a perspective, blah, blah, blah... In short, we'll take whatever foreign money we can get and be grateful for it, and if that means a tax system which definitely, or possibly, has some positive influence on the decisions of foreigners over whether to come to the UK, or to stay in the UK and, thereby, contribute positively to the economy, then why risk a change to that tax system ?

In the same parliamentary exchange, Jim Cousins (Newcastle Upon Tyne, Central, Lab), opines that "we cannot run the tax economy of this country as a large scale version of Chelsea football club". Ask any London black cab driver what they think will happen if Abramovich pulls his money out of Chelsea and the answer will invariably be that the football club will collapse. Now, Abramovich, along with Berezovsky, are probably among the least likely of the non-doms to exit the UK because of any change in the tax law, but the analogy gives food for thought.