Newspaper article The Evening Standard (London, England)

London a Tax Haven? Well, Only If You're Not British

Newspaper article The Evening Standard (London, England)

London a Tax Haven? Well, Only If You're Not British

Article excerpt


WHEN he rose at the Despatch Box last March, Grumpy Gordon must have thought he really was gabbling through his last Budget, and that by now he would finally have been allowed to move next door. Yet here we are again and, like the Crazy Gang, it's time for another last revival. How much more tedious for him than agreeable photo-ops to demonstrate he's not a miserable, paranoid control-freak after all, but really a relaxed, caring, rounded sort of dad, who likes nothing more than a flyby with our boys from the RAF.

Brown has spent his inheritance, turning Britain from a relatively low-tax, low-regulation country into a world leader in fiscal complexity and government interference, so the task of convincing us that he's a financial genius gets ever harder. As never before, he needs new sources of revenue, now that tax freedom day - the moment in the year when you stop working for the Chancellor and start working for yourself - has been pushed into June, according to preliminary work from Gabriel Stein at Lombard Street Research.

Yet there are some workers who reach this blessed date much earlier than the rest of us: those who are non-domiciled in Britain for tax purposes. This is a delicate subject, and Labour has shied away from tackling it despite its promises to do so. Foreigners are a great help to the economy - the experience of seeing domestic building work done on time and budget is an agreeable novelty to London's homeowners.

Most foreign workers here find income tax as compulsory the rest of us. A favoured few, though, don't. Highfliers can have two contracts, one for work done in Britain and another covering the time spent outside the country on business. That second one is written in a tax haven and escapes the Revenue, which explains why these people spend so much time rushing round the world.

While the bankers and traders who often have "dual contracts" have boosted London's wealth, it's hard to argue that footballers, for example, have done more than make one set of fans feel good at the expense of another. The foreign stars can arrange to pay 40% income tax on half their magnificent pay packets, and much of the money poured into our national obsession goes straight through the industry into ridiculous cars, Identikit blondes and bank accounts in tax havens.

London is itself a tax haven if you are not British and have plenty of capital. You pay tax on any income that you bring into the UK, but if your Visa card bill is settled from abroad the money may never actually enter the country. Importing capital escapes tax, since that's called inward investment and is considered a good thing. It's certainly good for house prices in the posher parts of town.

City highfliers are pretty helpful to the economy, too. London's position as the world's leading international financial services centre is now unrivalled, and hosts one of the few big industries where we have a real chance of winning against global competition. The contribution of the non-doms is huge, yet just as the sight of failing executives being paid Sven-figure sums to go away makes us sick, the thought that wealthy foreigners can enjoy our city halfprice is a severe test of our sense of humour.

The question for both bankers and footballers is whether, if they were forced to pay their whack, would they take their skills elsewhere? To which the response must be: where? It would take years for another European country to rival the Premiership, and even longer for a capital city to build itself into a credible banking alternative to London, however great the inducements. …

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