London gives rich foreigners a break
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KAI RYSSDAL: Fortune magazine has its 500 biggest companies in the world. Forbes has its 400 richest people in the world. London, England, has more foreign billionaires than anyplace else in the world. More than a dozen of the world’s richest tycoons live in the British capital — Russian oligarchs, Saudi princes, Asian entrepreneurs and the occasional Greek shipping magnate. Why, you ask? Surely not because of the climate, or the cuisine. No, the real reason, it seems, is taxes. Or the lack thereof. The foreign-born super-rich in the U.K. pony up less to the government there than they would in any other large, developed country. But it’s a tax break that’s fostering some resentment among less-affluent Brits. From London Marketplace’s Stephen Beard reports.
Stephen Beard: Foreigners who come to live in Britain face a simple question from the taxman:
Francesca LAGERBERG: Where’s your real home? What’s your real dwelling? What do you really belong to?
The question is crucial says tax accountant Francesca Lagerberg. Tell the U.K. taxman that your real home, your domicile, is abroad and he won’t touch a penny of what you own or earn overseas:
LAGERBERG: If you can keep items offshore, you’re only taxed if you bring them in to the U.K. If you’re not domiciled in the United Kingdom, it’s a fantastically useful tax concept.
The concept isn’t new. In the 1960s when the Beatles were singing ruefully about the high level of tax they were paying, that famous American skinflint J.Paul Getty was living here and reportedly paying very little to the taxman. He was a “non-domiciled resident.” Today, a dozen billionaires and thousands of other very rich people enjoy the same status.
ADAM LENT: This is becoming a growing national scandal in the U.K.
Labour union official Adam Lent.
LENT: People are noticing that those who are very wealthy or the “super-rich” as they’re becoming called in the U.K. have very different rules applied to them around tax.
Lent represents the British equivalent of the AFL-CIO. Delegates at the annual conference have just demanded the abolition of the non-domicile rule. Applications are not double-checked. It costs the U.K. $8 billion a year. And it’s unfair:
LENT: Most people find this absolutely remarkable that these people can be living here every single day of the year for decades, enjoying the benefits of living in the U.K. and living in London but not paying their fair share of tax as they would in most other advanced economies — as they would in America, for example.
But the non-domicile tax rule has many defenders like Tim Congden of Lombard Street Research.
TIM CONGDEN: Does Britain gain or lose from having these non-domiciled rich people here?
The answer, he says, is obvious.
CONGDEN: They set up businesses. They pay hotel bills. They pay plane fares and so on. And this all benefits the British economy, particularly the economy of London and the southeast.
If the non-domicile rule were scrapped, he says, thousands of wealthy foreigners would leave.
Adam Lent concedes the odd Russian oligarch might go. But he points out more than 100,000 people now have non-domicile status in Britain, most of them working in the financial markets. He reckons they will stay.
LENT: They have their jobs here. They have their homes here. They have their social life here. I simply don’t believe many thousands of them will uproot themselves and move to Monaco, for example, because there’s a change in their tax status.
The Government is reviewing the non-domicile rule. But it’s been doing that for a decade. Analysts say the government privately believes the tax break helps London maintain its status as a world city and a top financial center.
In London, this is Stephen Beard for Marketplace.
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