Brendan Barber, the general secretary of the Trades Union Congress has written to Alistair Darling, the Chancellor of the Exchequer, requesting that he holds firm on the issue of taxing non-domiciled plutocrats.
You will, of course, be aware of the recent debate over your proposals to introduce a flat rate charge for those registering as non-domiciled for tax purposes after they have lived in the UK for seven years.
I’m sure many will have been struck by how negative and inflexible has been the reaction of representatives from the City and the CBI to what are, after all, extremely modest proposals. It displays a worrying failure on the part of our wealthiest individuals and organisations to understand the growing dissatisfaction with the unfairness inherent in our tax system. In particular, there is an accurate and growing perception that while SMEs and those on middle incomes have no choice but to pay their fair share, the wealthiest are free to escape their obligations.
There is still an obligation on those who gain the most material benefit from the UK economy to explain how to address these popular concerns about the unfairness in the tax system. On this, however, they are silent.
We are simply not convinced many wealthy or talented individuals would leave the UK as a result of these minor tax changes. In any case even with non-dom status they are still meant to pay tax on their UK earnings. Non-dom tax breaks therefore provide a disincentive for the UK based super-rich to invest in the UK.
We, therefore, think it is vital that you remain firm in the face of business lobbying on the non-domicile proposals. Indeed, we would prefer you to go further and bring the UK into line with the rest of advanced economies in the world and expect those previously non-domiciled to pay tax in line with residency rules. We have calculated that such a move would raise £4.3 billion extra tax revenue – enough to help the Government meet its target of halving child poverty by 2010.
As the TUC’s recent report – The Missing Billions – revealed, there is a wider problem of tax avoidance and tax planning by the wealthy in the UK which leaves public services under-resourced, reduces the Government’s room for fiscal manoeuvre and, as mentioned above, places an unnecessarily heavy tax burden on SMEs and those on middle incomes. The report calculated that £25 billion is lost to tax revenues as a result of tax avoidance and £8 billion is lost as a result of planning by those earning over £100,000.
We fear that if City and business leaders are successful in resisting a modest change on the single aspect of non-domiciliary arrangements, then they will destroy any serious debate about how to respond to a much wider problem that has the potential to become a major political challenge in the coming months and years.