Indeed, the then Conservative opposition could hardly argue with the plan, since they had proposed something similar to finance their proposals to raise the threshold for inheritance tax (now shelved for the time being).
However, latest Treasury figures show the move may not have been the success the politicians hoped for. Around 5,400 non-doms paid the levy in its first year, raising around £162million in tax – far less than originally expected.
Furthermore, it is estimated that 11.5 per cent of non-doms left the UK in 2008/09, costing the government around £800million in lost revenue, since non-doms still pay tax on any UK earnings, not to mention property and indirect taxes. While their individual reasons for leaving are not known, there will be an assumption that the new charge played a part.
In other words, from a financial point of view, the levy has been a failure. But some of the tax’s supporters may argue there is a moral issue here – when other people in the UK are being asked to pay higher taxes, it is unfair for non-doms to miss out.
Either way, the results of the levy do show that introducing new taxes or raising existing ones can be counterproductive – and if the intention is to increase revenue, the government must ensure their proposals do not end up costing the country more than it gains.
For more information, please visit www.glazers.co.uk
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