Rachel Reeves set to dilute Labours £1bn raid on non-doms amid fears plan could bring in NO extra cash as super-rich flee Britain
Rachel Reeves is ready to water down her planned crackdown on non-doms amid Treasury fears it will bring in no extra cash and cost the country money.
Rachel Reeves is ready to water down her planned crackdown on non-doms amid Treasury fears it will bring in no extra cash and cost the country money.
Officials have warned that closing the loopholes could leave a £1billion hole in the Government’s planned spending for schools and hospitals.
But last night sources said that the Chancellor would change course if the numbers do not add up. ‘We are looking at the details of our proposals. We will be pragmatic, not ideological,’ an official told the Financial Times.
‘We won’t press on regardless, but we are not going to abandon this completely.’
The Tories spiked Labour’s guns earlier this year by scrapping the non-dom status, but Ms Reeves vowed to go further by closing loopholes.
Rachel Reeves may water down her planned raid on non-doms if the numbers dont add up, sources have said
Former Bank of England economist Andy Haldane warned Labour’s plans for non-doms could hamper efforts to grow the economy
Labour estimated it would raise £2.6billion over the course of this Parliament, including £1billion initially. The party said the money raised would be used to bring down NHS waiting lists and introduce breakfast clubs in every primary school.
But senior Government sources told the Guardian they feared the Office for Budget Responsibility may forecast the measure as a cost, because it would lead to non-doms spending less time in the UK.
However Ms Reeves is said to be minded to press ahead with the tax changes, the paper reported. Yesterday former Bank of England economist Andy Haldane warned Labour’s plans for non-doms could hamper efforts to grow the economy.
He told LBC: ‘Is this really garnering us any extra tax revenue? That’s the point. What is that doing to sentiment about UK plc?
‘Does that make it more or less likely people will park their money, set up businesses here and therefore generate growth?
‘It would give you cause for pause, we’ve seen that in terms of business confidence in the UK, which has been heading south over the last six weeks or so.
‘This is a time where we need more private finance to fuel growth and recovery.
‘If it were me, I’d be a bit careful in not deterring the flow of finance we need to get growth going. If it indeed is not helping fill what’s sometimes called the black hole then we’ll need to look elsewhere, and that’ll be a difficult decision.’
Non-domiciled status allows people who live in the UK, but who have a permanent home elsewhere, to only pay tax on the money they earn in the UK. It can be used to shield any overseas income and profits from UK taxes, unless they are transferred into the country.
Jeremy Hunt faced a backlash when he announced he would scrap the non-dom status in the March Budget over fears it would push wealthy people abroad.
He pledged to replace it with a ‘fairer residency-based system’ an action predicted to raise an extra £2.7billion a year.
From April next year, new arrivals to the UK will pay the same tax as everyone else after four years.
Shadow Chancellor Jeremy Hunt said that Labour fail to understand the importance of globally competitive tax rates to our economy
Last night, Shadow Chancellor Mr Hunt said: ‘It will be no surprise if Labour’s policy raises no money, because, as always, they fail to understand the importance of globally competitive tax rates to our economy.
‘I only hope that they drop their plans which turn non-dom tax policy from something that does raise money to something that may well not.’
A Treasury spokesman said: ‘These reports are purely speculation. The Independent Office for Budget Responsibility will certify the costings of all measures announced at the Budget in the usual way.
‘We are committed to addressing unfairness in the tax system.’
