New Report Outlines How to Make the UK More Attractive to Wealth Creators
Ahead of the Budget on the 30th October, the Adam Smith Institute (ASI) is calling on the Government to make the UK a more attractive place for highly-mobile wealth creators to live, invest, and build a business in;
In a new report, the leading think tank outlines a number of separate proposals, including tax cuts, a move to a sliding scale tax rate, and an Italian-style annual flat-fee;
This report builds on the Adam Smith Institute’s recent work which showed that the UK is set to be the worst in the world for millionaire exits as a proportion of the population, and that abolishing the non-dom regime could cost £6.5 billion and 23,000 jobs;
The UK’s current offering to high net worth individuals is uncompetitive, and the proposed abolition of the non-dom tax status will make it even more so;
It is crucial for the UK’s economic prospects that we seek to keep as many highly-mobile wealthy individuals in the country as possible and attract more from overseas;
Non-doms are wealth creators who contribute billions of pounds to the UK economy in tax revenue and business activity;
In an accompanying quote, former Chancellor of the Exchequer Nadhim Zahawi encourages the Chancellor to consider the ASI's proposals, rather than measures which would drive our highly mobile wealth creators away."
The Adam Smith Institute (ASI), a leading UK think tank, has been warning that high-numbers of highly mobile wealthy individuals will seek to leave the UK due to its high taxes and the proposed abolition of the non-dom regime, taking their tax revenue and investment with them.
The ASI’s Millionaire Tracker found that the UK is set to lose the greatest proportion of millionaires in the world over the course of this parliament. The share of the population who are millionaires is forecast to fall by 20% by 2028. And the ASI’s recent report into the economic cost of the abolition of the non-dom regime conservatively estimated that it would cost £6.5 billion by 2035, and 23,000 jobs by 2030.
It is crucial for the UK’s economic prospects that we seek to keep as many non-doms in the country as possible and attract more from overseas. Non-doms are innovators, financiers and start-up founders, who contribute billions of pounds in tax revenue and business activity. They are also highly internationally mobile, as they typically live in the UK but have not decided to live here permanently or indefinitely. This is why it is so important to create the right incentives for them to stay here.
As a new report from the ASI highlights, the government’s proposals for reform as part of the expected abolition of the non-dom status could have unintended, undesirable and unfair consequences. Non-doms will be incentivised to cease being UK tax resident by reducing the number of days they spend in the UK, tax liabilities will be imposed on the family of a deceased non-dom who have no actual legal right to receive financial gains from a trust, and UK tax resident owners of UK businesses will still be in a ‘worse’ tax position than their non-UK tax resident business-owning counterparts.
The ASI’s Director of Research Maxwell Marlow outlines several proposals to attract more highly-mobile wealth creators to come to the the UK, in a way that maximises tax revenue for the Exchequer, including:
Give HMRC powers to agree British ‘forfait’ agreements, inspired by the Swiss model. This would be a tailored regime, under which individuals are taxed on what they spend in the UK, rather than on their capital. They would not be allowed to work in the UK;
Move to a ‘sliding-scale’ tax rate, under which non-domiciled individuals pay tax on income and gains at sliding rates, depending on the number of years they have spent in the UK;
Charge lower rates of tax to newcomer high-earning immigrants in their earlier years, but withhold certain public services such as non-emergency access to the NHS. This may be particularly enticing to mobile individuals in the financial services sector;
Introduce an Italian-style flat-rate annual fee of £150,000 for individuals who are resident, but not domiciled, in the UK, as the ASI has previously called for;
Make the UK tax regime generally more competitive. For example, the ASI recently proposed the gradual abolition of capital gains tax. This will benefit British businesses as well as attracting more investment;
Simplify the UK’s tax system to make it easier to understand and reduce transaction costs.
The Rt Hon Nadhim Zahawi, Patron of the Adam Smith Institute and former Chancellor of the Exchequer, said:
“The Adam Smith Institute is doing vital work sounding the alarm about the UK’s increasingly uncompetitive tax regime, the number of highly-mobile wealthy individuals who are set to exit the UK, and the concerning economic impact that this would have.
Non-doms are often business-owners, start-up founders and entrepreneurs, driving investment into this country and increasing our tax revenue in the process. It is in Britain’s interests to keep them here.
Ahead of the Budget next week, I would strongly encourage the Chancellor to seriously consider these interesting proposals for reform, rather than measures which would drive our highly mobile wealth creators away.”
Maxwell Marlow, Director of Research at the Adam Smith Institute and paper author, said:
“As the non-dom regime comes under further scrutiny and a high number of highly mobile wealthy individuals consider leaving Britain altogether, it’s important to provide positive solutions to the question of how to tax them in a way which both encourages them to come and set up a business in the UK, whilst benefiting our economy.
Our new report outlines a number of positive reforms which would boost the UK’s economy through business activity and increased tax revenue, drawing on successful tax regimes from across the world including Switzerland and Italy
We urge the Government to listen to our concerns about the economic harms that would be caused by driving wealth-creators away, and consider our proposed reforms.”
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Notes to editors:
For further comments or to arrange an interview, contact press@adamsmith.org | 0758 477 8207
Maxwell Marlow is Director of Research at the Adam Smith Institute.
The Adam Smith Institute is one of the world’s leading think tanks. It is ranked first in the world among independent think tanks and as the best domestic and international economic policy think tank in the UK by the University of Pennsylvania. Independent, non-profit and non-partisan, the Institute is at the forefront of making the case for free markets and a free society, through education, research, publishing, and media outreach.
