“Tax the super-rich” is a great slogan for a Labour conference. As a policy, it’s not so great, as chancellor Rachel Reeves is belatedly discovering.
Because instead of raising extra money to spend on schools and hospitals, it seems likely to cut revenues.
That’s the fate awaiting Labour’s flagship policy to scrap a tax break for wealthy foreigners known as non-doms in her autumn Budget on October 30.
The term non-doms – short for non-domiciled – relates to someone who lives in the UK but whose permanent residence is abroad.
Non-doms only have to pay UK tax on the money they earn here. Their overseas earnings are exempt. Reeves has pledged to put a stop to this, and use the cash to fund her spending plans.
There’s a problem, though. She’s not going to raise any extra money from non-doms. Quite the reverse.
The Office for Budget Responsibility (OBR) originally forecast that scrapping the tax break would raise £3.2billion a year. Which was very silly of it.
Even sillier for Reeves to believe it.
According to a report in today’s left-wing Guardian newspaper, instead of raising £3.2 billion, taxing non-doms could cost the nation £1billion in lost revenues.
How on earth didn’t Reeves see this coming?
I mean, duh.
This monumental error another example – as if we needed one – of how Reeves is supposed to be clever but in practice does stupid things.
The Winter Fuel Payment fiasco was her original sin, but the errors are beginning to roll up.
So why is her non-dom tax raid backfiring? The answer is obvious but Reeves couldn’t see it coming. Non-doms are clearing out because they don’t want to be treated as a Labour cash cow.
They now face paying punitive UK inheritance tax rates on all of their worldly wealth, even money that has no link to the UK whatsoever.
As I warned in June, some could see their inheritance tax bills by climb by 1,000%. They could lose hundreds of millions, and they’re not hanging around.
Plenty of countries will be thrilled to welcome their wealth. We’ll have lost it for good.
The left needs to wake up. The Guardian proudly labels today’s story an exclusive but the Express flagged up the danger three weeks ago.
The international super-wealthy also happen to be super-mobile. They aren’t going to hang around waiting to discover how Labour will hit them next.
Which means ordinary taxpayers who can’t afford to move will have to plug the gap.
This is what happens when you put ideology before sound policy and intelligent tax planning.
Reeves is expected to press ahead despite the backlash, just as she has with the Winter Fuel payment. No doubt she will justify her decision by banging on about how the super-rich have to pay their share.
But the super-rich won’t be listening. They’ll be gone. And they’ll have taken their UK tax revenues with them.
Plus all the money they spend in the UK, the jobs they support, the businesses they run and the UK’s reputation as a good place to do business.
Ultimately, ordinary taxpayers will foot the bill for Labour’s war on wealth. The super-rich won’t pay a penny.
