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.