Labour have pledged to end the controversial non-dom tax status in the UK – a move that could mean a hit for the finance industry but might lead to a fresh influx of super-rich 1(1)k immigrants to Jersey.
Labour leader Ed Miliband is due to announce the move in a speech today, pledging to end the controversial non-dom status which allows some of the UK's wealthiest individuals to avoid paying UK taxes on their worldwide incomes.
He says the 200-year-old rule, which applies to around 116,000 people, makes Britain an "offshore tax haven for a few" and can "no longer be justified".
However the Tories immediately warned that it would lead to a "flight of talent and a flight of cash" from the UK.
Although the Chief Minister’s department and Jersey Finance have yet to comment on the proposals – which have been widely briefed to the UK national press ahead of today’s speech – one local finance industry figure said that if the move were to go ahead, it could have a neutral effect.
He said that although there could be a hit on the trust industry that manages offshore assets for non-domiciled individuals in the UK, there could be a corresponding boost to the Island from super-rich people fleeing the UK and looking for a new home, and coming to Jersey.
By the last count in 2009, super-rich immigrants – classed as 1(i)k’s under the old Housing Law – contributed £13.5 million in tax, besides a substantial benefit to the economy in terms of buying goods and services and providing employment that was estimated at up to £70 million.
Those who come here under the rules have to pay a minimum of £125,000 per year in tax – there has been a big push in recent years to attract more of them to Jersey through Locate Jersey, the States’ agency charged with attracting investment.
Under Labour's proposed reforms, anyone who comes to the UK and makes it their permanent home would pay tax in the same way from April 2016.
The tax status applies to people who are "non-domiciled" in the UK because they have their permanent home elsewhere.
They can opt to only pay tax on income that is brought into the country and pay no UK tax on their earnings or capital gains outside the country.
Supporters of the non-dom status say it benefits the UK by encouraging wealthy foreign investors to spend time in the country. In December last year Chancellor George Osborne announced that non-doms who have lived in Britain for 12 of the last 14 years will have to pay a £60,000 annual levy, up from the previous £50,000. A new £90,000 rate was introduced for those resident for 17 of the past 20 years.
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