Scrapping non-doms could cost UK up to £111bn by 2035, ASI think tank claims
Scrapping the non-doms tax status could cost the UK up to £111bn by 2035, the Adam Smith Institute (ASI) is warning.
The UK could also lose some 44,000 jobs by 2030 if the government enacts its plans to abolish the scheme, the free-market group has suggested.
These figures are based on just over half [11,050] of the 21,100 remittance basis non-doms leaving the UK, the ASI has said.
According to their analysis, if 7,094 non-doms leave the UK, a number suggested by Oxford Economics, the UK could face a ‘medium number’ of £32.4bn in lost growth by 2035, as well as 28,322 jobs by 2030.
It comes ahead of the government planning to scrap the non-dom status this Sunday, with the ASI warning that the government’s Finance Act is set to worsen the situation.
Lower growth will be due to less investment in capital, a drop in tax revenue, reduced consumption across the economy, and a corresponding loss of jobs, the ASI added.
The ASI warns non-doms may leave the UK due to the abolishment of their current tax status, increased taxes on high net worth individuals (HNWIs), the UK’s poor economic outlook, and hostility towards wealth-creators.
Maxwell Marlow, director of public affairs at the Adam Smith Institute (ASI), said: “The scale and pace of the exodus of wealth-creators is extremely alarming. What has been a trickle has now become a flood.
“This is going to have a severe impact on the UK economy. Fewer non-doms will mean reduced investment, a lower tax take, worse public services and fewer jobs.”
He added: “Considering that the government’s fiscal planning has been based on their assumption that abolishing the non-dom status will actually raise money, this could create a serious hole in the UK’s finances.
“The government must act as a matter of urgency, by exempting non-doms from taxes on foreign profits, introducing an Italian-style annual flat fee and improving the UK’s business environment. A failure to do so would be an act of enormous economic self-harm.”
The ASI is calling on the government to implement an Italian-style annual flat fee of £150,000 for wealthy UK residents who are not tax-domiciled.
They say the policy could raise money while attracting more non-doms, generating further tax revenue and boosting the wider economy in the process.
An HM Treasury spokesperson said: “The figures presented by the Adam Smith institute are incorrect and we do not recognise them.
“The independent OBR has confirmed that the changes to the regime will raise £33.8bn over the next five years.”
They added: “Replacing the outdated non-dom tax regime with a new internationally competitive residence-based system addresses unfairness in our tax system, attracts the best talent and investment to the UK, and ensures everyone who is a long-term resident in the UK pays their taxes here.”