The promise made by Ed Miliband on Wednesday to abolish the non-domiciled (non-dom) rule, an archaic rule that allows some wealthy British residents to use the country as a tax haven, has been hailed as one of the most important pre-election announcements that the party has committed itself to.
Non-taxable incomeThe non-dom is a British resident whose permanent home is deemed to be outside the U.K., and therefore pays tax only on domestic earnings and not on foreign income, as long as that income is not transferred into the country. In lieu of tax, a fixed charge of between £30,000 and £90,000 is levied on such individuals.
“There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain like you and me, but aren’t required to pay taxes like you and me because they take advantage of what has become an increasingly arcane 200-year-old loophole,” Mr. Miliband said on Wednesday in a speech at the University of Warwick.
The non-dom rule has made the U.K. a tax-haven, the Labour party claims, and in turn supports offshore tax-havens where rich U.K. non-doms park their money. Among those who claim non-dom status are some of the wealthiest of British residents. They include Saudi princes, Greek shipping magnates, Russian billionaires (like the Chelsea club owner Roman Abramovich), and foreign investors and industrialists like the Indian steel magnate Lakshmi Mittal and the Hinduja brothers.
Mr. Miliband in his speech claimed that there are currently 116,000 non-doms in the country, “costing hundreds of millions of pounds to our country. It can no longer be justified, and it makes Britain an offshore tax haven for a few.” The Conservative Party has accused Labour of inconsistency, as it was only a month ago that Ed Balls, Shadow Chancellor of the Exchequer said that if the non-dom rule was abolished, people may leave Britain.
