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Just leave them alone, Darling

Wednesday, 13th February 2008

The Spectator on Alistair Darling's climbdown over non-dom tax proposals

In holding these positions, both Darling and Osborne are failing to address the fundamental argument that it is complete folly to pursue the non-dom community for what can only be a very small fiscal gain, if any. The government says that its non-dom tax might raise only around £800 million a year. Estimates of how much UK tax is currently paid by non-doms on declared UK income and gains vary from £4 billion to £7.6 billion — but it is easy to see how, if any significant number of them choose to leave the country to avoid the tax itself and the unwelcome scrutiny that will accompany it, the Treasury could be a net loser. If we add to that calculation the loss of tax on profits of businesses that would emigrate with their owners, and the loss of service-business revenues and employment associated with non-doms — who undoubtedly contribute many billions to the wider economy — then the taxman will almost certainly end up counting the cost.

More fundamental still, the non-dom community has been a badge and guarantee of Britain’s status as a great mercantile nation, and of London’s unique role as a centre of global finance, ever since Greek shipowners and European bankers began to congregate in the City many decades ago. We are rightly proud that so many foreign businesspeople choose to live and carry on their trade here. They do so partly because London is one of the world’s most civilised capitals, partly because it is conveniently situated between time zones, but partly also because it offers them such a tolerant and non-intrusive tax regime. London, and Britain as a whole, has clearly gained over the long term from that pragmatic stance, not only in volumes of trade and finance but in the philanthropy and arts patronage in which wealthy non-doms have been so prominent. To chase away the foreign-born private-equity players, hedge-fund managers and investment bankers who make London as a business centre what it is today, for negligible short-term fiscal and political gain, would be utterly misguided.

Both Darling and Osborne are well capable of making this calculation for themselves. On the issue of non-dom tax, both should retreat in step, before any more damage is done.

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Mark Musoke

February 26th, 2008 6:10pm

Erudite as usual but where is the actual evidence about non-doms and their contribution to GDP? Can the Speccie get hold of some data for us non-economists to try and digest?