Yesterday we saw that Reform’s proposal to allow mega-rich non-doms to buy their way out of the existing UK tax system, under the worthy-sounding guise of helping the least fortunate of our country, was in fact basically another one of their massive giveaways to the already rich.
The Institute of Fiscal Studies has since highlighted some more problems with the proposal.
Firstly, it incentivises not investing in the UK. It welcomes the super rich to live in the UK, taking advantage of what the state has to offer. But it would be a disincentive to actually using their money to invest in our country.
it would be relatively attractive to non-doms with high offshore wealth, but not necessarily to those who want to invest that wealth in the UK (because remitting money to the UK brings it within UK taxes).
They highlight also that the claim that the cost of the Britannia Card would “all but guarantees a net positive outcome for the Treasury” financially is not obviously true. It might be a net benefit if the holders pay a lot of UK tax on their non-foreign income – or it might not.
The £250,000 fees for the card would be redistributed to low-paid workers and therefore be neutral for the exchequer, so the question is what other revenue impacts the policy would have.
…
for those who would have been in the UK (and paid tax on their UK income) anyway, the exchequer would lose the tax they would otherwise have paid on their foreign income and gains – which must be at least enough for them to prefer to pay £250,000 to avoid it, and would often be far more than that. The relative sizes of those two effects would be key.
After all, presumably someone who would buy the card would see it as more favourable to their own tax situation than the status quo.
The next problem is that the “redistribute the income to the lowest-paid full-time workers” lacks detail, whilst superficially attractive, is potentially misguided and is probably actually not feasible to implement, at least not with our current systems.
HMRC doesn’t know whether or not anyone who is self-employed is a full-time worker.
Providing lump-sum payments to low-paid full-time workers would face serious administrative challenges. For a start, HMRC currently has no way to identify whether a self-employed individual is working full-time – would the self-employed be included regardless of how much they worked, or excluded altogether? Neither choice seems satisfactory.
And to the extent that the policy comes across as trying to help the poorest in society, the “must be a full-time worker” criteria doesn’t work.
The policy would benefit the lowest-paid full-time workers, though this does not correspond to the lowest-income households, both because the lowest-income households do not generally have someone in full-time work and because many of the beneficiaries would have working partners and thus a higher household income than their own earnings might suggest.
The way they talk about it is that it’d be a threshold entitlement. If you’re in the lowest 10% of fulltime workers by income you’d get it. Bottom 10%, it’s yours. But hit the 11th percentile of income and you’d lose it all. thus it may:
…discourage low earners from increasing their earnings and risking losing eligibility for this payment
As Faiza Shaheen’s column in the Guardian says, the whole thing is “political theatre” :
Reform’s ludicrous ‘Britannia Card’ is a masterpiece in political manoeuvring
that:
While it promises to enrich the poor, it simultaneously offers a subtle tax break to the wealthiest. The proposal would be a significant boon to the global super-rich