Greek ship sector set to leave UK over tax

Greek ship sector set to leave UK over tax

By Kerin Hope in Athens

Published: February 12 2008 02:00 | Last updated: February 12 2008 02:00

The Greek shipping industry is preparing to desert London in response to the planned tax crackdown on non-domiciled foreigners living in the UK, bankers and owners have told the FT.

Under the UK government plans, non-domiciled foreigners who have been resident for seven years will have a choice of paying a £30,000 ($58,400, €40,300) fee each year if they want to continue claiming the remittance basis. If they do not pay the fee, they will pay normal UK tax on worldwide income and gains. "Non-doms", as they are more commonly known, do not currently pay UK tax on their overseas earnings unless they bring them into the UK.

"If you have four or five family members working in the company, the tax bill becomes oppressively large," said one Greek shipowner of the proposed fee.

About 100 Greek family-owned shipping companies who run global businesses from a London headquarters together control about 20 per cent of the Greek-backed commercial shipping fleet, the world's largest, according to brokers. They are estimated to contribute about $10bn (€6.9bn, £5.1bn) yearly to the UK financial services industry.

While few members of an industry famous for shunning publicity are prepared to comment publicly, insiders are in no doubt that a decisive shift is now under way that will see the industry disappear from the capital and relocate to Greece, lured by generous tax arrangements, improved telecommunications and a more relaxed lifestyle.

"Owners have made contingency plans. In three to five years they will almost all be gone," said a Greek banker with clients at the highest levels of the industry.

Most of those planning to leave are second-generation shipping families who until now have bucked a trend led by younger London-based owners to re-base in Athens.

Pointing out that about 30 companies had moved to Athens from London since 2000 because of concerns they would become liable for income tax on foreign earnings, Nikos Tsakos, a board member of the Greek Shipping Co-operation Committee, which represents London-based owners, said that rate of departure would now accelerate.

"It's a pity because London will lose a lot of expertise in the field of shipping-related services," he warned.

Both Athens and London-based shipowners rely on services provided by UK brokerage, insurance and legal firms.

A large percentage of this business, estimated to be worth around $30bn last year, would be transferred to Athens.

"Over the past decade we've seen a steady flow of brokers and shipping lawyers moving to Greece as more owners re-based here and opportunities expanded," said a Piraeus-based lawyer. "We're expecting another wave of arrivals."

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Non-dom plan 'to cost Alistair Darling £2bn'

By James Kirkup, Political Correspondent
Last Updated: 6:45pm GMT 11/02/2008

Alistair Darling's tax crackdown on Britain's non-domiciled residents will end up costing the Treasury more than twice the sum the Chancellor expects it to raise, a new study has calculated.
# Have your say: Should there be a tax crackdown on non-doms?
# Calls mount to scrap tax on non-domiciles
# Comment: This non-doms levy is a total non-starter
# What are non-domiciles? non-dom Q&A

The Treasury is expecting to raise an extra £800 million a year by 2010 from a £30,000 annual tax on wealthy non-doms, as part of an effort to cut public sector borrowing.

But the study warned that the non-dom plan will cost the Government £2.1 billion in lost tax receipts due to "capital flight", in which wealthy individuals leave the UK and take their money with them. Even the Treasury has admitted that 3,000 of the wealthiest non-doms could leave the UK as a result of the tax plans.

According to tax experts at the Society of Trust and Estate Practitioners, non-doms pay £7.16 billion in tax annually. The society has calculated that the departure of the richest would cost Mr Darling more than £2.1 billion.

David Harvey, the society's chief executive, said: "We want rich people in the economy, paying tax and creating jobs, but Government plans will have the opposite effect."

That warning has been echoed by one of the Treasury's own advisers, who fears the tax proposal will drive international financiers abroad.

Bob Wigley, a Merrill Lynch banker who advises the Chancellor on retaining London's status as a global finance centre, said the tax plan "was ill-conceived from the start".

He added: "These measures were partly aimed at the non-domiciled billionaires. They could, if not withdrawn or substantially amended, drive away offshore, young up-and-coming talent that currently choose to live in London and make London the leading global financial centre."

Some wealthy individuals have already left the UK, worried about the uncertain future the country offers for their business affairs: at least 25 Greek shipowners are said to have closed their London offices and registered their business elsewhere.

The figure was disclosed in a written plea to Mr Darling from maritime groups including Lloyd's, the insurance market, the Baltic Exchange and the Chamber of Shipping.

Leading galleries and museums also fear the new rules will cost them major donations, as the tax rules will make it more expensive for people to bring artworks into the UK.

Under current tax laws, people resident in the UK can register for "non-domiciled" status, meaning they pay no tax on earnings outside the UK.

Under plans due to take effect in April, anyone who has claimed non-dom status for seven of the last 10 years will have to pay an annual fee of £30,000 to the Exchequer.

The Treasury says there are around 116,000 people in Britain who have non-dom status. They include tycoons like Lakshmi Mittal and many Greek shipping magnates, but the vast majority work for banks, hedge funds and private equity firms in the City.

Opponents of the Treasury plan claim non-doms have brought investment into the country and generated wealth that spreads throughout the country.

The Treasury has said the final detail of the tax plan is not fixed, raising hopes of a climbdown before the final package is announced next month.