Wednesday 8 April 2015


Non-doms are back in the news. What is extraordinary is not that Labour are finally talking about abolishing the tax loop-hole for the super-rich, but that it has survived so long - and nobody has been screaming about this real benefit-scrounging.

Income tax dates from the need to pay for the Napoleonic wars - and from the very start there were some built-in dodges to enable those who could really afford to pay tax to avoid paying any at all.

The fig-leaf rationale for this at the time was empire building. If people pledged not to bring their income from overseas in to the country they were exempt from being taxed. In the pre-1857 British Empire when imperialism was essentially mercantile rather than governmental this had some of logic. Empire-building before the Great Rebellion in India was an early form of PFI with private individuals given only limited support from the state.  The system incentivized the younger sons of the nobility, aspirational social risers, and other assorted chancers escaping the rigid hierarchy of British society, to become minor potentates  in far flung parts of the world. Where they could live lives of opulence and decadence undreamed of in the home country. And so in some sense the tax dodge helped build the empire.

Nowadays the idea of ring-fencing overseas wealth  makes no sense from any point of view. Over the years the grounds for claiming non-dom status have become even more spurious - it is now more about having a foreign born parent or a bank account registered abroad than it is about owning a tea plantation. In fact there is no real pretence that it is anything other than a dodge for the super-rich.  

Apologists for this system argue that its abolition would drive the super-rich from this country. However this supposes that the hidden hand of the market somehow ensures that a trickle down effect ensures that we all receive some benefit from the mere presence of the super-rich regardless of whether they are actually building factories in this country or just counting the interest on their off-shore bank accounts. In fact on a practical basis it actually discourages the bringing back of real investment into this country - which of course would be taxable. 

Getting rid of this should hardly be controversial - no other country in the world has such a blatantly unfair and illogical loophole - but it will not be easily given up. It is emblematic of the perversity of the system we live under.

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