July 9, 2007 8:58AM

Gordon Brown’s Finance Minister Defends UK’s Status as Tax‐​Haven

The United Kingdom has extremely favorable rules for “non‐​domiciled” residents, a policy that enables highly productive people to live in London while avoiding most taxes on capital income and foreign‐​source income. The left in Europe hates this policy, especially since entrepreneurs and investors are escaping high‐​tax nations to live in London, but the new Chancellor of the Exchequer seems content to leave well enough alone. The Observer reports:

London, the great global financial centre, has another claim to fame: it has become the fastest growing destination for international tax avoiders. The world’s super‐​rich and an elite cadre of financiers working in the Square Mile are increasingly using non‐​domicile tax status to sidestep paying tax on their fortunes. …Those benefiting from non‐​dom status have rocketed over the last five years. The Treasury…confirmed that 112,000 individuals indicated non‐​dom status in their self‐​assessment returns in the tax year to April 2005. This is a 74 per cent increase over 2002’s figures. …Unlike UK citizens, non‐​doms escape tax on income from property or capital gains. It is not only the international jet set who claim non‐​dom status; it is also available to some of the most powerful figures in the City. …Non‐​domicile status is self‐​assessed. Forms are easy to download from the web and there are just 19 questions. One tax expert says it is easy to convince the Revenue that a claimant is based overseas, whether it is through a relative or a series of overseas investments. In addition, the Revenue makes very few checks on status. Many senior City figures qualify for non‐​dom tax exemptions, including Dominic Murphy, the UK boss of private equity giant KKR. And it is widely thought that the Chancellor’s City adviser Sir Ronald Cohen and a large collection of Labour Party donors do too. …Earlier this week, new Chancellor Alistair Darling made it clear that nothing must harm the international pre‐​eminence of the City and he warned against ‘knee jerk’ reactions to calls to amend the regulation.