Louise Cooper

The squeeze on tax havens is only just beginning

Image: the British Virgin Islands

The message from the budget last month was clear – at some point in the future the Chancellor is going to raise taxes. A lot. The announced increase in corporation tax rate from 19 per cent to 25 per cent from 2023 is a sign of things to come.

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And yet the overall tax take has already increased substantially since the Thatcher lows of the late 1980s. The amount of tax the government raises is already equivalent to 35 per cent of GDP, the highest level since 1969. And prior that that, as the chart above shows, you have to go back to 1948/9 for years when the tax take was this high.

And so it is probably no surprise that some of the UK’s richest are looking to shield their wealth from the Chancellor and move to places where they do not need to bother with paying back the costs of protecting society from the ravages of the pandemic. In February alone, the Isle of Man experienced a tenfold increase in the number of people looking to move to the small Island half way between Belfast and the Lake District.

And lucky them as residents pay no capital gains tax, no inheritance tax and no stamp duty and pay far lower rates of income tax with a maximum of just 20 per cent, less than half the UK’s maximum rate of 45 per cent. Although with the exception of the annual TT motorcycle race, it looks a very boring place to live.

But this is not just an option used by a handful of wealthy individuals who can afford the 20-minute helicopter ride back to the UK for a bit of entertainment. This is a far, far bigger problem.

According to a 2019 report from the IMF, tax havens cost governments around the world between $500-600 billion of lost tax revenue each year.

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