A snowballing exodus of high-earners from Britain – the top 5% of whom pay half of all income tax – is a disaster for Rachel Reeves brought on by her own war on wealth, financial advisers have warned. The Telegraph‘s Eir Nolsøe has more.
Rachel Reeves likes to present herself as a friend of the global elite, rubbing shoulders with finance ministers in Washington and posting pictures online meeting Wall Street billionaires.
But behind the façade, a storm is brewing at home over the Government’s change to non-dom tax rules on these financial masters of the universe, who help fuel a disproportionate amount of UK tax receipts.
Fresh figures this week showed that the British Government is having to borrow more than expected, as tax income typically paid by the wealthiest has disappointed since the start of the year.
Lower capital gains taxes, levies on self-assessed income and a weak growth in financial services bonuses have also contributed to the dire picture for Reeves.
The list of wealthy non-doms and British business owners fleeing the UK is also growing longer by the day, with places such as Dubai, Italy and Greece mopping up Britain’s richest émigrés.
Last week, Richard Gnodde, Goldman Sachs’s most senior banker outside the US, and British billionaire brothers Ian and Richard Livingstone became the latest to shift their tax domicile outside the UK.
They join Egypt’s richest man, Nassef Sawiris, who co-owns Aston Villa Football Club. Steel magnate Lakshmi Mittal, whose family is worth £15 billion, is expected to follow.
Advisers to wealthy global elites warn the chickens are coming home to roost after Reeves’s tax changes, and that efforts to scale back attacks on the wealthy have fallen short.
As the Chancellor returns from her Washington trip, is she starting to regret her move to collapse the non-dom regime?
Among the first to know when a billionaire or multimillionaire decides to up and leave are their tax advisers.
Ceri Vokes, a partner at law firm Withers, says around 10% to 15% of her clients have left Britain because of Reeves’s less generous non-dom scheme and changes to inheritance tax for business owners.
Those with the most to lose are the first to leave, she says.
“It’s definitely the case that the clients who left were those at the upper end of the wealth spectrum. We definitely saw more billionaires leave than millionaires and hundred-millionaires,” Vokes says.
Reeves in January tried to temper the blow with a more generous phase-out of the tax benefit but it “had absolutely zero impact on client behaviour”, Vokes adds.
Britain’s non-dom rules, which date back to the days of William Pitt the Younger (1759-1806), allow foreigners living in the UK to avoid paying tax on income from abroad.
In the 21st century, these wealthy non-doms have become an increasingly important source of tax revenue for successive British governments.
According to the latest government figures, there were 37,800 non-doms in the UK in 2022 who chose to only have foreign income or capital gains taxed if brought into the country.
On average, these people paid £170,700 each in income and capital gains taxes as well as National Insurance contributions.
In comparison, the average British worker pays £7,000 in income tax and National Insurance and most would have paid no capital gains tax at all.
Stuart Adam, of the Institute for Fiscal Studies, says it is impossible to say with any certainty yet whether the blow from wealthy people upping and leaving is bigger than Britain’s fiscal watchdog had anticipated.
Indeed, just as much of a concern is how many people would normally come that now won’t – a difficult thing to measure.
There is a lot at stake: the top 1% of the highest-earning workers pay 28.2% of all of the Government’s income tax revenues. If you zoom out a little further, the top 5pc pay just less than half at 48.8%.
“One of the consequences of tax revenue becoming more reliant on a smaller number of people is that it does make the public finances more vulnerable to the behaviour of that small number of people,” Adam says.
“If you did see a large exodus, that would have an outside impact on the public finances. That is a reason to worry,” he adds.
Worth reading in full.
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It’s almost as if “squeeze the rich until the pips squeak” had never been tried and its consequences unknown.
Thomas Sowell: Socialists don’t understand economics; if they did they wouldn’t be Socialists.
And any self-respecting economist understands all too well how adept socialists are at spending other people’s money.
Prof Sowell also remarked that he still couldn’t understand why it was greedy for someone to want to keep their money they had earned, but not greedy for someone to want to take someone else’s money to use to serve their own purposes.
That’s Socialists.
As well as spending it very badly and achieving very little for spending a lot.
” Socialists don’t understand economics”
The real worry is that just maybe this lot do understand economics and are doing this deliberately?
My thoughts also as I might have stated more than once or twice. If correct just who exactly are they working for?
If Reeves ends up in a low
paid job or on benefits as a consequence of this, I will buy you all a box of Smarties.
These people are destroying lives. A life on the British benefit system can be exceedingly comfortable for those that know their way around it. It would warm the cockles if somebody could tell us that the future for Thieves is bright, the futures Orange.
Who could possibly have predicted that this would happen? I mean, its not as though it has ever happened before……Oh!…..hang on…….
‘…in the Report of Professor Swann’s Working Group on Manpower Parameters for Scientific Growth (Cmnd. 3102) which was published in October of this year. On page 13 of that Report, Professor Swann’s Committee commented that no less than 37 per cent. of physicists who obtained Ph.Ds at British universities in the six years from 1958–1963 are now working abroad, many of them in the United States. To me this is one of the most dramatic figures in the whole debate. In the same period, 43 per cent. of all physicists with a Ph.D. degree took their first employment abroad…..’
‘Money must have a great deal to do with this….’
https://api.parliament.uk/historic-hansard/lords/1966/dec/20/emigration-the-brain-drain‘
Genius!
‘Up until the late 1970s, the Laffer curve was virtually unheard of and had been under-used in my opinion to the grave detriment of countries’ economies the world over. Tax rates are way too high, and, as a result, prosperity has suffered. The Laffer curve is as obvious as any economic concept can be, yet, in a debate at Oxford, I was told that slides in the very first lecture of Oxford’s undergraduate economics course describe the Laffer curve as “the economics of wishful thinking”. In addition, I was told that, in a 2012 survey of the top 40 US economists at Princeton, Yale, MIT and Harvard, “Not a single one agreed with the curve!
‘Former British Prime Minister Gordon Brown increased the UK’s highest tax rate from 40 per cent to 50 per cent, and tax revenues went down – as did the British economy and the Labour government. And then George Osborne cut the highest tax rate to 45p and revenues went up. US Presidents Harding and Coolidge cut the highest tax rate – from 77 per cent in 1919 to 25 per cent in 1925 – and tax revenues from the rich soared. The story was repeated when President Kennedy cut the highest tax rate from 91 per cent to 70 per cent and repeated yet again when President Reagan dropped the highest tax rate from 70 per cent to 28 per cent. I could go on and on, but I think you get the picture.’
https://iea.org.uk/wp-content/uploads/2017/03/EA-SPRING-2017_TAX_LAFFA.pdf
Next time, can we have a Chancellor who can read………?
It isn’t just that set people who aren’t wealthy but perhaps well off are leaving as well. Ask yourself a simple question, can you think of one good reason to stay in this country if you have the means and opportunity to leave? Just one advantage of staying put.
There is just no bloody reason and at the same time there is a primal injunction to get out while you can. It really is that serious. I am going please don’t stay. I went to visit a relative in a home and honrdtly on the way in I had Third World beggars asking for things. So it is a matter of taking charge in small matters. Yes of course I am being ironic.
Reeves is so hopelessly out of her depth, it’s embarrassing.
But have they got who could replace her?
Nobody.
It is a cabinet utterly devoid of talent (or principle, decency or courage, any sort of merit).
You are so fucked.
Luckily I am out already.
I guess putting the woman who pushed the tea trolley around the Bank of England in charge of the finances was not such a good idea.
No, it’s a disaster for the country.
It’s what Reeves deserves.