Criticism of non-dom tax move grows

Criticism of non-dom tax move grows

By John Willman, Business Editor

Published: February 8 2008 20:00 | Last updated: February 8 2008 20:00

New opposition to Treasury plans for a crackdown on non-domiciled foreign residents emerged on Friday following the warning by Digby Jones, trade and investment minister, that they threatened London’s position as a global financial centre.

The Italian Chamber of Commerce and Industry for the UK wrote to the chancellor warning that the proposal to raise £650m a year by targeting wealthy “non-doms” would deter foreign companies from sending employees to the UK.

Carlo Colombotti, vice-president, said the proposed changes would impose higher tax bills and extra costs on middle-class people and pensioners.

The shipping industry also called on the government to abandon the plans, saying they would undermine the UK’s £1.5bn maritime services sector. The Baltic Exchange, Chamber of Shipping, Maritime London and the Joint Hull Committee, which represents underwriters, said international shipping enterprises based in London would move abroad if the crackdown went ahead.

The CBI welcomed the warning, given by Lord Jones in an interview with the Financial Times, that the UK could lose its attraction as a destination for skilled people from overseas.

John Cridland, deputy director-general, said: “Intentionally or otherwise the government is sending the signal that high-flying individuals and their families are no longer wanted here. The attractions of Switzerland and other destinations are growing ever stronger.”

The Italian Chamber, which has surveyed 367 companies with a combined turnover of more than £14bn a year and 46,345 employees, said fairness required at least a two-year grace period to allow proper consultation and fiscal planning.

“To change the rules with short notice leaves insufficient planning time,” Mr Colombotti added, “and goes against the idea of stability and certainty for which the UK economy, and UK law in particular, are highly regarded for abroad, and which is often the main reason why foreign companies establish a presence in this country.

“No doubt you have also noted in this respect that Paris, Frankfurt and especially Zurich, Geneva and New York are already making their move in the certainty that they will inherit some of the financial and related activities of the City of London.”

The new rules will require expatriates living in the UK for more than seven years to pay a £30,000 fee to keep their overseas income out of the British tax net.

On Friday Lord Jones said it was reasonable that those who came to the UK to enjoy the opportunities it offered made a contribution towards its prosperity after seven years. He added he was confident he could continue successfully promoting the UK, which remained an “excellent place to invest”.

However, Brendan Barber, TUC general secretary, defended “these extremely modest proposals to make non-doms pay a flat charge for their tax avoidance”. Lord Jones should make up his mind whether he was a member of the government or a lobbyist for business, he said.