Question Time on BBC 1 last night opened
with a question to the panel about what George Osborne could do (in his new
budget) to combat unemployment.
The panel was not full of good ideas – at
least not in my opinion – so here is an idea that on the face of it may look
unpopular, but would help reduce un-employment in the UK.
The UK has as one of the few countries in
the world – and the only larger nation – a special tax break for resident
non-domiciled individuals. These are largely, but not exclusively, foreign
nationals who live (and work) in the UK, but are exempted from income tax on
the part of their earnings that arise outside the UK and are not remitted to
the UK. For many wealthy individuals this is more likely to income from assets
and capital gains, rather than actual earnings from performing a function
abroad.
As the assets must be held offshore (in
places like Switzerland, Luxembourg, the Channel Islands et al) and as the
administration etc. must all take place offshore the UK is in effect
subsidising all these territories.
The law itself looks like it is here to
stay, even if there is now an annual levy (currently £30,000) to be paid if one
wants to claim to be resident, but non-domiciled. Various studies have been
carried out about the benefits to the economy of what these ‘non-doms’ spend
here.
Historically the UK was one of the obvious
places to move to if one was looking at escaping from the local punitive tax
system. This has changed over the last few years, as the ‘system’ is no longer
perceived to be friendly.
The UK also has a world-class financial
centre in London and despite it not being popular at the moment; the City has
been a huge contributor to the UK economy for the last 25 years.
So what can Osborne do? Well, he could turn
the whole thing on its head and offer a reduced taxation system e.g. 15% on the
income and capital gains of these assets, but only if these assets are held,
managed and administered in the UK. If the assets were held outside the UK,
normal taxation rates would apply.
This would be a good boost for the UK
banking sector – one that it could use with all the headwinds it is currently
facing – and for all the supporting service industries. Tens of thousands of
jobs would be created directly as these would be repatriated from offshore and
many more in the wake of this. The obvious losers would be the offshore locations,
but they are not the responsibility of the UK chancellor and they have enjoyed
huge benefits at the UK’s expense for years!
A similar arrangement exists in Luxembourg
where the banking industry is also very significant – and they are doing what
they can to support their local financial services industry so it is obviously
not against any EU legislation.
Come on George; keep the UK as the place to
go (and stay in) for the wealthy, but bring the jobs supporting this wealth back
where they belong….
