Non-dom tax plans will lose money

Well, who on Earth didn't see this coming?

"The Treasury is expecting to raise an extra £800 million a year by 2010 from a £30,000 annual tax on wealthy non-doms, as part of an effort to cut public sector borrowing.

But the study warned that the non-dom plan will cost the Government £2.1 billion in lost tax receipts due to "capital flight", in which wealthy individuals leave the UK and take their money with them. Even the Treasury has admitted that 3,000 of the wealthiest non-doms could leave the UK as a result of the tax plans.

According to tax experts at the Society of Trust and Estate Practitioners, non-doms pay £7.16 billion in tax annually. The society has calculated that the departure of the richest would cost Mr Darling more than £2.1 billion."

If you place a new tax on a group with the financial means to live anywhere they choose, who often work in industries that are used to communicating globally, they'll move.  Their companies will relocate so that they don't have to pay more to attract the best staff.  This will put a dent in tax revenues that can easily outweigh the revenue gains from higher rates.  The effect will be exacerbated if you explicitly threaten further tax rises - as the Government did (PDF, Para 5.81).


The Government will pay a price for their shallow populism bashing non-doms.  They'll find it harder than expected to balance the books.  The price British, domiciled, taxpayers are asked to pay will be far higher if London's position as a financial centre is imperiled.

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