'Non-doms and those making most of their income from assets, including property and dividends, remain relatively undertaxed'
Joe Powell, Co-founder Kensington Against Dirty Money
The Chancellor has recently moved back to his family’s house in Kensington. He’ll no doubt be relieved to escape the chaos of Downing Street, but the move should also serve as a reminder that the non-dom status his own family has benefited from is in need of urgent reform.
Researchers at the London School of Economics revealed earlier this month that more than one in 10 adults in the borough of Kensington and Chelsea are non-doms paying no UK tax on offshore income. This staggeringly high number in the country’s richest and most unequal borough shows the current scheme is not fit for purpose. Labour’s proposal – announced by the Shadow Chancellor this week – to scrap non-dom status and replace it with a scheme closer to its original purpose is an excellent start.
Our current tax system is grossly unfair and exacerbates the extreme inequality that blights many parts of the country. In Kensington, thousands of workers are paying extra National Insurance contributions this month at the same time as the cost of living is rising sharply, and one in four children are growing up in poverty. Sadly, that number is now likely to increase as families juggle heating, food and other essential bills. Meanwhile, non-doms and those making most of their income from assets, including property and dividends, remain relatively undertaxed. The private equity carried interest loophole continues to provide fund managers with a tax break of up to £170,000 a year.
A lack of transparency fuels this unfairness in our tax system. In March, a grassroots coalition of Kensington residents launched a campaign against dirty money in our borough. There are over 6,000 properties in Kensington and Chelsea registered anonymously in foreign countries, with many owned by non-doms. Our campaign is calling for more transparency over who owns property in the borough, and proper enforcement action to tackle the corruption and money laundering that too often enables luxury real estate purchases. Given many of these homes remain empty, we are also calling for more action from our Council to effectively reduce the number of empty homes and build more social housing.
It is therefore very welcome news that Labour will pair its reforms to non-dom status with a fast-tracking of the new public register of overseas beneficial owners of property in Britain. Combined, this will make our system significantly fairer at the top end of the tax system. As it stands, residents of up to 15 years can avoid paying taxes on overseas income, a far longer period than most other countries allow. Indeed, most visa holders working temporarily in the United States have to disclose and pay tax on their foreign earnings throughout their stay. A new targeted scheme for genuinely short-term residents who plan to move back to their home country within a few years will be much less open to abuse.
This is extra tax for the Treasury that should be used to help close extreme levels of inequality in parts of the country like Kensington, and provide much more comprehensive support to families struggling to cope with rising bills. With the Chancellor seen recently canvassing in the borough for the Council elections on May 5th, it’s a good time to say to the Treasury: prioritise struggling working families, and ask the super wealthy to pay their fair share.
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