Richard Murphy: Non-dom Rule is Anachronistic, Unjustifiable

December 1st, 2009

Richard Murphy has a fascinating essay exploring the anachronistic concept of “domicile” in the UK.  News broke over the weekend that Zac Goldsmith, a Tory candidate for Parliament, maintains a non-domiciled status thereby allowing him to not pay taxes on any earnings made abroad.  From the Guardian:

Goldsmith, who is standing in the key marginal seat of Richmond Park, west London, confirmed that he retained the non-domiciled tax status inherited from his billionaire father, Sir James Goldsmith. He said he had derived “very few” benefits from being a non-dom and had already decided to give it up.

The Liberal Democrats have accused Goldsmith, who inherited an estimated £200m from his father, of being unfit to stand for parliament.

Matthew Oakeshott, the Lib Dem Treasury spokesman, said: “He’s claimed non-dom status all his life to keep his offshore hundreds of millions free of income tax, capital gains or inheritance tax. He must pay the millions he’s dodged to the British taxman.”

British citizens with interests abroad can register for non-domiciled status, meaning they do not pay tax on earnings made outside the UK.

Murphy goes beyond the immediate political ramifications of this case and analyzes the very existence of the domicile concept:

Whether Goldsmith is exploiting this situation is not the real question. The real questions are fourfold. First, why do we let an elite who are as resident in the UK as anyone else pay less tax than others who are also resident here? Second, why do we allow non-domiciled status to be claimed by people who are born here, have lived here much of their lives and are so integrated into UK society that they are even MPs and peers here? Surely, better policing is needed when the loss to the UK from this rule is, in my current estimate, about £3bn a year? Third, why do we allow the UK to continue to operate as a tax haven in this way, at considerable cost to our international credibility and at cost to the credibility of the anti-tax haven campaign the UK is spearheading? And finally, and most importantly, why do we tolerate a tax law that is illegal?

Well said.  The rest of the essay is certainly worth reading if you get a chance.

Written by Clark Gascoigne

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