Reform UK is up to their usual tricks in terms of misleading us about the impact of their “make the very rich even richer” economic policies.
This comes from their announcement of a “Britannia Card”, the details of which are available here. But in summary, this card would allow anyone who wants to move to the UK, or already has “non-dom” status – meaning that they chose to make another country their home for tax purposes – opt out of paying any tax at all on their wealth, income or capital gains earned abroad if they are prepared to make a one-off payment of £250,000. It’s basically a way for the very rich to buy themselves a ticket out of a lot of our tax system.
These payments would then be divided up and given tax-free to the lowest 10% of full-time workers, giving them something like £600-1000 each.
It’s being called a Robin Hood tax– redistributing much-needed money from the rich to the poor. What’s not to love about that?
Well, quite a lot.
Tax Policy Associates runs through several concerns.
Firstly, it’s quite obviously a blatant method for the mega rich to buy themselves out of their normal obligations. £250,000 sounds a lot to most of us – but is it to the truly wealthy? Especially given it’s a one off payment.
Let’s imagine someone who would otherwise be due to pay tax on £1 billion. £250,000 represents a 0.025% fraction of their wealth. Basic income tax payers in the UK have to pay 20% tax on anything above their personal threshold, and up to another 8% if they need to pay national insurance. Quite the difference.
And the basic rate tax payer needs to pay this continuously – whereas the £250,000 is a one-off payment.
This comparison isn’t really a fair reflection of what would happen as the situation for non-doms is still, even after recent changes, rather more favourable in terms of off-shore tax than what normal British citizens have to pay.
Nonetheless, it has been calculated that it would still constitute a whacking great loss to the UK state, exempting the super rich from providing a tax intake of substantially more than the £250,000 lifetime fee would.
Tax Policy Associates calculate the immediate cost to the state – and hence the benefit to the very rich – of this as being at least £34 billion over four years. That’s because all the people who are already in Britain currently subjected to tax, but are eligible for the Britannia Card for a one-off payment, will stop paying that part of their tax.
The proposal would give a windfall gain to a relatively small number of very wealthy people who were planning to stay here and pay UK tax, but will now pay the £250k fee instead. That’s tax that now won’t be received, and there will be no wider economic benefit (because these people were already going to be here).
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The £33.9bn reflects tax raised from a small number of very wealthy people who would opt to buy a Britannia card and so pay no tax – it’s therefore revenue immediately lost by Reform UK’s proposal.
Their analysis goes into why they think even this is an underestimate.
The director of another think tank, CenTax, agrees:
But Dr Arun Advani, director of think tank CenTax, told The i Paper that the proposal would cost taxpayers £34bn over five years, citing estimates from the Office for Budget Responsibility for 2024/25 to 2029/30.
Even if non-doms spend £2.5bn on “Britannia Cards”, the £34bn in lost tax receipts effectively means foreigners would get a tax cut of at least £31bn, he said.
“Cost to the state” of course inevitably means even more cuts to state provided services or increases for other types of tax – those that more normal citizens have to pay.
As the i Paper reports:
Dr Advani said the £34bn cost was a “big problem” that would force Reform to raise taxes, cut spending or increase borrowing.
The Labour party agrees, calling it a bonanza for billionaires.
…Ellie Reeves, the Labour chair, said it was “quite simply a bonanza for billionaires”.
“Not only is this a golden giveaway to the rich, but experts warn this will leave a massive black hole in the country’s finances that working people will be left to pick up the bill for,” she added.
Tax Policy Associates details two other problems they see with the policy.
First, it would discourage most the high-skill professionals we increasingly need to benefit our country from moving here. They wouldn’t be able to afford the immediate £250,000 payment – and if you don’t pay it then you have to pay full tax on your foreign income – which is actually a big tax increase from today’s rules.
Whilst the proposal makes the UK more attractive to the very wealthy, it makes the UK much less attractive to the highly skilled and highly paid professionals we want to attract into the UK – for example doctors, coders, senior scientists and entrepreneurs. The effect of the Conservative and Labour reforms is that these new arrivals would be exempt from tax on foreign income for four years without paying anything. That’s attractive because high earners will often have assets/savings back home, and having those savings taxed in the UK is unattractive.
Secondly, you have to convince those taking advantage of the offer that the one-off lifetime payment for tax exemption will indeed last forever. The non-dom tax situation has been changed a lot over time by various government. Tax Policy Associates struggle to believe that many of the super rich would take a punt on the idea that the lifetime offer is in fact going to last their lifetime.
It also highlights something about their immigration policy. Reform tend to be virulently anti-immigrant. But the stated purpose of this proposal is to attract foreigners to our shores. But only extremely rich ones. So they do seem to like a certain type of immigration – it’s just very much limited to their billionaire friends.
None of this “give more money to the mega-rich” impact probably comes as a particular surprise to many people though given the general tendency of their economic policies to favour the rich far more than that average working person they pretend to care so much about. Reform UK is a party / business of the rich, for the rich.