I remember a couple of years back on one of my stays in the UK, the talk around the dinner table was of “Bankers” and some people called “Nom-Doms”. How it was shocking how much they earned and how they should all just pay their FAIR SHARE in taxes. I didn’t really know who the “Non-Doms” were at the time, but to me it just sounded like an attempt to create a stage villain. A group of people the Government could point at and say “look this mess is nothing to do with us. It’s them, it’s all their fault”.
So my interest was tweaked when I read on the Adam Smith Blog , that the Government is to again raise taxes on the Non- Doms.
“non-domiciled individuals, especially those who have been resident in the UK for many years, (must) make a fair tax contribution” – and, in this case, ‘fair’ means “increasing the existing £30,000 annual (remittance basis) charge (RBC) to £50,000”, regardless of a particular taxpayer’s actual level of income.
What’s more, it turns out that the government’s decision isn’t a revenue-raising manoeuvre; as Eamonn pointed out in the Wall Street Journal earlier this month, “the non-dom tax raised £162 million in its first year; but … the exodus of those 16,000 (non-doms) cost the Treasury £800 million,” a fact that will not have escaped Whitehall policy planners. Why, then, would the government increase the RBC by nearly 70%?
The creation of stage villains for the populace to throw rotten tomatoes at is a political tactic as old as government itself and wealthy foreigners have always been easy targets. As envy is one of the vices which afflicts all people to a greater or lesser extent it is easily exploited by politicians who want to appropriate money and power in the name of redistribution and fairness. It permeates much of Socialist / Marxist thought which divides the world into the oppressed and the oppressor, the haves and have-nots. In this view the economic pie is fixed, and therefore someone with a large portion of the pie can only have it at the expense of the rest who necessarily must have smaller portions.
The Big Government redistributer takes £100 from A’s slice of the pie and gives it to B. There is no change to the overall size of the economic pie as it is fixed. The only consequence is that B now has a FAIR SHARE of the pie.
Of course, those of us on the on the Free Market side of the fence don’t see the economy in terms of being a fixed pie and sees the unforeseen consequences that Governments’ actions can have. The Government is grossly inefficient at distributing resources and ‘A’ may have used that £100 in a far more productive way than ‘B’. ‘ A’ may also change his behaviour. Why work so hard when the Government can come along and take away your hard earned money? All this will negatively impact the economy and both A and B will be worse off.
Putting the Non-Doms in the fiscal equivalent of the Public Stocks didn’t just mean that the Treasury lost £800 million. The reduction in the number of rich Non-Doms in the country mean that there are now 16,000 Saville Row suites that haven’t been made, 16, 000 less gardeners that haven’t been employed and 16,000 Land Rovers still left unsold in the UK Dealers. And as many of these Non-Doms had businesses in the UK, that’s a lot of receptionists, graphic designers and sandwich makers out of a job or with a reduced order book.
Contrary to what has repeatedly been claimed by the monopolists, the City is losing out to other jurisdictions in the race for people. Even though there is very little office space, housing or vacancies in schools in Switzerland – the Swiss are reluctant to expand – there has been a relatively large influx of London financiers to that country, especially from hedge funds and energy and commodity trading firms. It is the wealthiest, most senior individuals who are leaving. Figures from the Swiss Federal Migration Office tracked down by Channel Four reveal 383 UK citizens working in banking and financial services moved to Switzerland in 2010, up 28 per cent on the previous year. Taking the overall banking, insurance and consulting sectors, including IT, 1,379 Britons were given permission to work long-term in Switzerland in 2010, up 29 per cent. This compares to a rise of 14 per cent for non-UK citizens, though a chunk of the latter will also have moved from London.
The Swiss Funds Association estimates that 20-25 UK hedge funds have set up offices in Switzerland over the past year alone. Switzerland has also witnessed an inflow of Russian oil traders, including Rosneft and Bashneft; several other teams have recently left London for Geneva or Zurich. TNK-BP is opening a trading arm in Geneva; it will be based a short walk away from the third, fourth and fifth largest trading firms in the world. This is a blow for London, which for the first time since the late 1980s is losing its lead in the trading of physical crude and oil products.
Globalisation is not just about buying cheap Chinese goods: it also limits the state’s powers to over-tax or over-control its citizens. Britain needs to wake up to this new reality, and fast.
Now for some vintage Thatcher. I love the word games of Simon Hughes who in his question to Mrs Thatcher made the claim that relative poverty had increased under her administration. Much as if Warren Buffet taking up residence in your rather exclusive private road, would suddenly inflict severe relative poverty on the residents there.