Matthew Sinclair

Ed Miliband is deliberately misleading ‘you and me’ on the non-dom rules

When he announced Labour Party proposals for changes to the non-dom rules, Ed Miliband tried very hard to be as misleading as possible without lying. He seems to have failed.

He said that non-doms ‘aren’t required to pay taxes like you and me’. They are. Non-doms are required to pay the same UK taxes as the rest of us on their UK income and foreign income remitted to the UK. Most of us don’t have any non-UK income, let alone non-UK income which we do not wish to remit to the UK (regardless of the tax treatment, it would mean we couldn’t spend it here) and therefore we do not pay tax on unremitted non-UK income either.

Clarity on the current rules is really important for what could be a question worth billions to the UK exchequer: will this measure raise revenue?

After all, non-doms do create revenues for the UK government in three ways: taxes on their consumption; taxes on the UK income and foreign income remitted to finance that consumption; and taxes on the economic activity that consumption creates (e.g. the wages in jobs it creates, which obviously matter for other reasons too). If they leave in at all significant numbers then that might outweigh the revenue gains from higher taxes on those who stay here. Until we have proper research on all three of those channels, the right assumption to make in commenting on these proposals is probably that they are as likely to reduce overall receipts as to increase them.

What Miliband was trying to get at in his comment is that the non-dom rules do mean a very rich non-dom with a large international income will pay less than a very rich ‘dom’ with a large international income.

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