The report estimated that 5,800 taxpayers’ consumption contributes around £1.5bn to GDP a year which would be foregone if they migrated.
This could lead to more than 23,000 job losses from foregone consumption in addition to the lost revenues from VAT.
These are concentrated in the transport, recreation and culture and hospitality industries.
“Naturally, the new revenue extracted from remaining taxpayers would presumably be spent by the government elsewhere in the economy, but we do not know where,” the report added.
David Lesperance, managing partner at Lesperance & Associates, said many of his clients were waiting with bated breath to see what Reeves would announce in the Budget.
He explained: “Whether one thinks they are paying their ‘fair share’ or not, the annual average UK tax contribution is almost £160,000. That is multiples of what the top 1 per cent pay. Looking closer at this number, it is skewed upwards by the ‘golden geese’ UHNW non-doms rather than the ‘worker bees’ non-doms from the City.
“A perfect example is Rishi Sunak’s wife Akshata Murty, who contributed £4.4mn in her last year as a non-dom. Golden geese do not need to be in the UK to make and maintain their wealth and have less “life inertia”. As a result they have or will leave the UK tax system, which results in the asymmetric negative impact on tax revenue that the Adam Smith Institute is predicting.”
According to the report, countries like Switzerland, Italy and Spain were attracting HNW individuals with favourable tax regimes.
Recommendations
The Adam Smith Institute recommended introducing an annual flat fee of £150,000 for non-doms, valid for 15 years.
This proposal would exclude global assets from UK inheritance tax and permit tax-free remittance of foreign income and gains.
In a scenario where all current non-doms could afford and be willing to take-up this scheme, it would raise a nominal revenue of at least £12.45bn annually, according to the report.
“The UK must seek to out-do its counterparts with an attractive offer for high-net worth taxation - it is clear that it is losing out on investment and residency by these individuals. In order to do so, we suggest replicating the Italian flat-tax system,” it added.
Robert Broderick, private client partner at law firm Payne Hicks Beach, thought adopting a lump sum annual tax regime to replace the current non-dom regime would show the world that the UK was serious about attracting overseas investment whilst recognising the fact that everyone (including non-doms) needed to pay their fair share.
