The Price of Envy and Xenophobia

I'm pretty sure the media like using the term "non-doms" partly because it sounds rude and partly because most people don't know what it means. All they know about non-doms in fact is that they don't like them - which is generally the case when it comes to the Great British public and things they don't know about. (Other examples could include economics and finance generally, the Pope and the Catholic Church, and virtually the entire world beyond the English Channel.)

Allister Heath a couple of days ago reported on the Coalition's continuation of the politics of envy by other means - not to mention the politics of self-harming xenophobia - in his column here.

Not all of the decline in non-doms can be blamed on higher taxes. Part of it will have been due to the recession. Some non-doms – those with relatively modest foreign incomes – will have decided that it simply wasn’t worth paying £30,000 and will have opted instead to become regular taxpayers. But many will have left – and many more who would otherwise have settled here will have decided it was no longer worth it, especially given the constant fears that the fee could be hiked further.

The Treasury told us 5,400 non-doms opted to pay the fee. This means that the taxman raised an extra £162m. The Treasury wouldn’t or couldn’t give us any more information, so I’ve made a few guesstimates to work out the net cost of the tax raid. Being over-generous to the government, it might be that half the missing non-doms are now full taxpayers. Let’s assume they are paying an extra £15,000 in tax each. That would make another £120m in tax, taking the total to £282m. Let’s then assume that the 8,000 missing non-doms would have paid £50,000 each in UK income tax, capital gains tax, VAT and stamp duty – the gross loss jumps to £400m, which means that the Treasury is £118m worse off. The real loss is almost certainly much higher. Once again, Arthur Laffer’s adage that increases in tax rates can lead to a reduction in tax receipts has come true. In years to come, Britain’s short-sighted stupidity will be used as a case study in introductory economics courses. In the meantime, the rest of us will have to pay even more tax to plug the deficit.

I haven't been blogging much recently partly because of a New Year's resolution to cut back on my Internet usage and partly because of studies. Now that I've had my first bit of good news though, I may well feel emboldened to get back into the whole "tax thing". Hence, in fact, this new fresh blog and this new address.