Exit of Non-Doms Might Result in £12.2bn Loss for the Treasury

Exit of Non-Doms Might Result in £12.2bn Loss for the Treasury

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Chancellor Rachel Reeves' move to ax non-dom tax exemptions may slice into the public coffers by "billions," suggests new research, causing a setback for the Treasury's financial plans.

Reeves, sticking to manifesto promises, yanked tax breaks for the mega-rich non-domiciled individuals last year's Autumn Budget. The Office for Budget Responsibility (OBR) projected this change would bolster tax receipts by £10.3bn this year.

However, the Centre for Economics and Business Research (Cebr) proposes even if non-doms don't skedaddle from the UK due to these reforms, the Treasury would pocket only £2.5bn in the initial year—a projection that could leave economists at the OBR red-faced.

Researchers assert that if more than a quarter of the UK's non-doms high-tail it out, the Treasury would face a hefty deficit. In fact, if half leap ship by 2030, the government's revenues would plummet by an estimated £12.2bn.

Cebr noted that the typical non-dom icologists £21 in income tax, substantially more than the median income earner, and also chips in significantly more in National Insurance Contributions and Capital Gains Taxes than the average Brit.

Decreased tax inflow as a result of non-doms leaving would impose additional strain on public finances. After Reeves hiked taxes on employment and slashed welfare to maintain her tiny £9.9bn fiscal allowance, this deficit would be a considerable blow.

The Treasury Faces a Tax Revenue Dip

Reacting to the report, commissioned by pro-enterprise group Land of Opportunity, shadow business secretary Andrew Griffith accused Reeves of getting her calculations completely wrong.

"Non-doms fleeing the UK for better pastures threatens disaster for our economy. Worse yet, we'll all be forced to cough up higher taxes to compensate," he commented.

"Much like a company rehabbing, the Conservative Party is now helmed by new management.Progress might still be slow, but we remain the only party unhesitant in championing businesses and wealth creators."

Shadow Chancellor Mel Stride dubbed Reeves' tax reforms reckless. "Armed with billions in potential losses and some of our wealthiest taxpayers departing the scene, the Chancellor is gambling with the long-term durability of our public finances and the nation's competitiveness," he said.

Cebr managing economist Sam Miley argued the government remained "overly reliant" on retaining former non-doms in the UK. "For every non-dom who ups stakes, the Treasury will lose not only the tax revenue from their income and gains, but also from their regular expenditures. Since non-doms usually splash the cash as well as earn big bucks, the risk to the Treasury appears more profound than assessed by the OBR,” Miley concluded.

A Treasury spokesperson maintained the OBR's projections were inaccurate. "We utterly reject these numbers. The independent OBR confirms the adjustments to the regime will generate £33.8 billion over the next five years."

"The replacement of the outdated non-dom tax regime with a competitive residence-based system addresses unfairness in our tax system, lures top talent and investment to the UK, ensuring those who long-term reside in the UK pay their due taxes here," the spokesperson asserted.

Several prominent non-doms have already scarpered the UK, with numerous others believed to have left for friendlier tax jurisdictions. For instance, Richard Gnodde, a senior banker at Goldman Sachs, is reportedly bound for Milan to dodge changes to the non-dom regime. Egyptian billionaire Nassef Sawiris attributed his departure to high taxes, while steel magnate Lakshmi Mittal is also preparing a hasty exit.

1. The tax reforms proposed by Chancellor Rachel Reeves, including axing non-dom tax exemptions, could lead to a significant reduction in the Treasury's projected tax revenue, according to a report commissioned by the Land of Opportunity.
2. Andrew Griffith, the shadow business secretary, criticized Chancellor Rachel Reeves for allegedly getting her calculations wrong, claiming that the departure of non-doms for better tax jurisdictions would pose a threat to the economy and necessitate higher taxes for the general public.
3. Sam Miley, the managing economist at the Centre for Economics and Business Research (Cebr), argued that the government's over-reliance on retaining former non-doms in the UK could lead to a more profound impact on the Treasury than the Office for Budget Responsibility (OBR) initially assessed.
4. Mel Stride, the shadow Chancellor, deemed Rachel Reeves' tax reforms as reckless, stating that the Chancellor was gambling with the long-term durability of the public finances and the nation's competitiveness.
5. Several non-doms have already left the UK due to changes in the tax regime, with high-profile individuals like Richard Gnodde, a senior banker at Goldman Sachs, reportedly relocating to Milan. Egyptian billionaire Nassef Sawiris and steel magnate Lakshmi Mittal are among the numerous others believed to have departed for friendlier tax jurisdictions.
6. In response to the criticism, a Treasury spokesperson contended that the OBR's projections were inaccurate, asserting that the adjustments to the non-dom tax regime would generate £33.8 billion over the next five years and that the replacement of the outdated non-dom tax regime with a competitive residence-based system would attract top talent and investment to the UK.

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