Rachel Reeves said this flagship policy would collect funds – it could end up doing the opposite | Money news Aitrend

What do we do with non-Domains?

This is a question more than a handful of people have arisen in recent times.

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It seemed quite simple. In his first budget as a chancellor, Rachel Reeves Promise a repression against the non-dom regime which, for 200 years, has allowed residents to declare that they are permanently domiciled in another country for tax purposes.

As part of the program, non-domes, some of the richest people in the country, were not taxed on their foreign income.

Then it all changed.

Standing in the shipping case in October of last year, the chancellor said: “I always said that if you make Great Britain your home, you should pay your tax here. So, today, I can confirm that we abolish the tax regime without domain and remove the obsolete concept of domicile of the tax system from April 2025. ”

The hope was that this decision would collect 3.8 billion pounds sterling for the public bag. However, there are signs that non-domes leave in such large numbers that politics could end up costing investments in the United Kingdom, jobs and, of course, tax that non-doms already pay on their British income.

If the figures do not accumulate, this tax food policy could be transformed into an autumutilation act.

The budget already under tension, poor calculation would be financially expensive. The alternative, a U-turn, could be expensive for other reasons, eroding faith in a chancellor who has already made a turbulent race.

So how much should it be worried?

Data on the number of non-doms in the country is published with a considerable discrepancy. It will therefore take a while before knowing the full impact of this policy.

However, there is a lot of uncertainty about the behavior of this group.

While the Budgetary Liability Bureau provides that policy could generate 3.8 billion pounds sterling for the government over the next five years, assuming between 12 and 25% of them, he admitted that he lacked confidence in these figures.

Worrying for ministers, there are signs, especially in Londonthat the exodus could be greater.

Real estate sales

The analysis of the real estate company Lonres shows that there was 35.8% of transactions in May in May for the properties of the most exclusive postal codes in London compared to one year earlier and 33.5% less than the pre-pale average.

Real estate agents blame the drop in demand from non-domic buyers.

This is not surprising for Magda Wierzycka, a South African billionaire businesswoman, who manages an investment fund in London. She herself threatens to leave the United Kingdom unless the government decreases its plans.

“The non-doms leave, when we speak, and the problem with the figures is that the consequences will only be known in the next 12 to 18 months,” she said.

“But I have absolutely no doubt, based on people I know who have already left, that the consequences would be quite significant.

“These are not only a question of people who leave on which everyone is concentrated. They are also people who do not come, people who have come, business creation, employment have created, they do not come. They take a look at what happened here, and they do not come.”

Lack of options for non-Domains

But where will they go? Great Britain was unusual by offering such an attractive diet. Bar some notable exceptions, like Italy, most countries manage tax systems based on residence, which means that people pay taxes in the country in which they live.

This approach noted that many non-domes have escaped to pay tax on their foreign income because they did not live in countries where they won their foreign income.

In all cases, generalized double tax treaties mean that people are generally not taxed twice, although they can have to pay the difference.

In an important sense, Magda is right. This could take some time before the consequences were fully known. There are few firm data points to draw conclusions right now, but the past could be illustrative.

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The non-Dom regime has been repeated reform. George Osborne changed the system in 2017 to limit it to only 15 years. Then Jeremy Hunt announced that the Conservatives would completely abolish the regime in one of its final budgets.

After the 2017 reforms, there was an initial shock, but the figures stabilized, lowering only 5% after a few years. The data suggests that there was an initial exodus of people who were probably planning to leave anyway, but those who stayed – then happened – intended to stay in the United Kingdom.

So, should the government travel the figures and hold its nerve? Not necessarily.

Has the work crossed a red line?

Stuart Adam, principal economist at the Institute of Tax Studies, said that the answer could be much greater this time due to certain key changes in work.

The government will no longer authorize non-doms to protect money held in the trustees, therefore a 40% successions will be due to its areas. For many, it’s a red line.

Mr. Adam said: “The 2017 reform deliberately built in what you could call an escape, a way to avoid paying much more taxes thanks to the use of existing offshore trusts. It was a deliberately open road to allow many people to avoid the tax.

“It is therefore not surprising that they are not increasing and does not leave. Part of the reform which was announced last year was not to have this kind of difference in the system to allow people to avoid the tax using the trustees, and therefore you could expect to see a more important response to the type of reform that we have seen announced now, but that also means that we do not have much ideas.

With public finances under considerable pressure, this will offer little comfort to a chancellor who operates on the best margins.