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Tax tourism: will the wealthy be wooed overseas?

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

These are, if you pardon the pun, taxing times for Theresa May’s Government.

As well as her attempts to persuade Britain of the merits in tightening belts and being more convincing adopters of austerity measures, she has, of course, to steer the country through the turbulent and uncertain waters created by last year’s vote to leave the European Union.

In the last week, the Office for Budget Responsibility (OBR) has published a Fiscal Risks Report, the first in a series of studies to be published every other year, aimed at identifying potential economic hazards and highlighting ways of avoiding them.

It was presented by the OBR’s Chairman, Robert Chote, and although many headlines were generated by his warnings that the Prime Minister and her Chancellor of the Exchequer, Philip Hammond, may be unable to escape the twin perils of recession and Brexit, my attention was drawn to another element of his speech.

Mr Chote effectively – and factually – contradicted what is received wisdom: that Britain’s wealthy don’t pay their fair share in tax.

What he revealed is that the wealthiest one per cent of the population contribute 27.7 per cent of all the Income Tax received by HMRC. That figure has grown by 3.3 per cent over the last decade, even though the riches generated by those same individuals has fallen by 1.4 per cent.

The data, though, is not simply the OBR’s validation for Britons with the biggest bank accounts. It was one factor among what Mr Chote believes are risks.

As well as paying more Income Tax, the wealthy have been faced with a taper in personal allowance, changes in pension tax relief and the often eye-watering sums which they’re required to cough up in Stamp Duty Land Tax. That’s without the threats by Jeremy Corbyn to tighten the tax grip still further if Labour assumes power.

A fall of just one per cent in the income of the richest few, Mr Chote predicts, would cost the economy £1.5 billion a year in tax receipts.

Whilst that domestic difficulty is alarming in itself, it becomes even more of a concern when set against the backdrop of a concerted effort to lure lads and lasses with lots of lucre from the UK overseas.

Tax Tourism

Italy and France have both made overtures to entrepreneurs and the exceedingly wealthy in an attempt to have them resettle as the opening salvos in Britain’s European extrication continue.

In return for shelling out €100,000 and a promise to buy a home and live in Italy for six months each year, Rome is extending to non-doms tax breaks which can be used for up to 15 years, including the prospect of needing to provide less of an account of income generated outside of il bel paese than is required by HMRC.

Perhaps unsurprisingly, experts are suggesting that there could be a considerable number of people swapping Britain’s climate and the attentions of an increasingly aggressive Revenue for the somewhat warmer conditions of the Mediterranean and a reduction in paperwork.

If those forecasts indeed come to pass, the economy might be in an even worse predicament than that currently observed by Robert Chope and colleagues at the OBR.

I would argue that it’s in the country’s interests to set aside the partisan pot-shots which are now routine in political rough and tumble and acknowledge the personal and professional value of Britain’s wealthy.

Many have acquired their fortunes through industry and innovation, setting up businesses which not only pay large sums in a variety of different taxes but often employ sizeable numbers of people too.

When someone whose very organisation is focused on responsibility stresses the importance of ensuring the welfare of the well-off, maybe it’s time to take heed.

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