America could return as the pre-eminent financial center of the world in the face of sour grape politics going nuclear in Britain:

Proposed legislation could seriously impact on London as a financial centre, writes David Rothenberg

People from overseas who intend to return home but are resident in the UK – known as non-domiciles – will be affected by tax changes proposed by the Government.

These may encourage people not to come to the UK in the future, and could seriously impact on London as a financial centre. Those who are here may seriously consider leaving.

Guess what? They are already making thier plans to pull up stakes and leave.

When the Government first indicated in October that it was going to make changes, the most serious issue appeared to be a fee of £30,000 that non-domiciles would have to pay to continue to enjoy the tax shelter.

Many wealthy individuals, who contribute much to this country, were prepared to pay that, but the details of the new legislation will make them think twice about staying and discourage new arrivals.

The changes now proposed will, for example, retrospectively tax past receipts from a foreign trust that gave rise to no tax liability at the time. And now the proposed new legislation means that the individuals can have a tax liability in the future, even if he or she receives not a penny more from his or her overseas trust if the individual stays here.

Another problem of the proposed changes is that existing overseas mortgages will become much more expensive. A fall in the top end of London house prices could be one consequence of these proposed changes because non-domiciles are going to leave. Lawyers are already advising non-domiciles to put their expensive properties on the market before prices fall.

While lawyers and accountants in the UK are tearing their hair out trying to understand the new rules, their counterparts overseas will be rubbing their hands in glee for the new business they will be enjoying.

Other changes give rise to new problems. For example, if you buy something overseas and bring it to the UK, you pay tax on what you initially paid for it, not what it is worth now.

This is, frankly, the one of the most insane things I have ever heard. Whoever thought this up clearly has no understanding of markets, people and money.

Here are some examples of what the new rules might mean for people who are non-domiciled and resident in the UK.

• A man goes to Paris and buys a new car overseas which costs £20,000. He uses it for a couple of years then brings it to the UK. The car is now worth less than £10,000 but he has to pay tax on the original £20,000.
• A young grandfather, aged 50, has a new grandson in Australia. He sends £10,000 from his foreign income to the parents of the child. The parents look after the money as the child grows up. Eighteen years later, the grandfather, now aged 68, has forgotten about the gift to his grandson. The grandson decides to come to the UK to visit his grandfather for six months and his parents give him the £10,000 as spending money. As soon as the child arrives in the UK with the money, the grandfather has a tax liability and obviously has no clue that he is liable.
• A husband is not domiciled in the UK but is happy to be taxed on his worldwide income and gains as if he was UK-domiciled. He is not claiming any special advantages for being non-domiciled and has never done so. His wife, who is UK-domiciled, and the husband have decided to sell their Spanish holiday villa because they have other capital gains that can soak up the loss. Under the new proposed rules, however, just because the husband is non-domiciled he is denied the right to use the losses. There is little doubt that some non-domiciles will argue that this is a breach of EU law.
• A woman is an American banker and was sent to the UK for three years from New York. Ten years ago her family lawyer suggested she make a living will, a common arrangement in the US, and she forgot all about it. If she fails to tell HM Revenue & Customs (HMRC) the date the trust was created and the name and address of the current trustees, within 12 months of arriving in the UK, she will be liable for a penalty of up to £300. Similarly, if she has been resident in the UK before April 6, 2008, she has to tell HMRC by April 2009.

For many non-domiciles, the fact they have to disclose details of their overseas arrangements will be the last straw. This is pretty intrusive stuff and makes life more and more difficult for people working here. This is simply a case of civil servants looking at bureaucratic convenience instead of looking at the wider picture and how it affects the country generally.

http://www.telegraph.co.uk/money/

Kafkaesque is a word that comes to mind, but it does not convey the outrage that many must be feeling at these proposals.

Many people came to the UK because the rules were favorable. Now, after settling down, doing good work, bringing prosperity and creativity to the UK, the government wants to change the rules halfway through the game. That is not cricket.

But I digress. In the face of this absurd threat, key people in the financial sector are already leaving the UK, and they will not be replaced:

More than half of the wealthiest people in Britain are planning to leave or transfer their money abroad following the Government’s crackdown on ‘non domiciled’ residents, a study has found. […]

Like a few others trying to explain the impact of the change in the non-dom rules, my example is a good illustration of why the impact of this change is so detrimental to the UK.I do not believe I am unique.

I am a non-dom working for an international bank in London. I will be leaving the UK next month partly as a result of the law change and executing the same job that I did in London from another European city. I will no longer be paying any tax in the UK at all. The bank will not replace me with a UK employee because there is no vacancy. My assistant may have to look for another job.

There is no doubt that these rules have benefited the UK immensely, attracting talent and creating wealth which could easily have benefited another European country. Frankfurt and Paris were often mentioned as possible rivals to London as a financial centre in the mid 90’s.

The cack-handed way this law change has been implemented is adding to the climate of uncertainty (which the domiciled are also suffering from: CGT rules, changes to trust law) which will be extremely costly to the UK in the long run, driving away investment and enterprise.
Posted by Non-Dom on February 4, 2008 10:59 PM

Would you miss non-doms?

This will drain the city of all its irreplaceable talent, and like it says above, other countries are “rubbing their hands in glee” because they now have the chance to usurp the once unassailable position of London as the greatest financial centre.

This makes absolutely no sense from any perspective. You want London to continue to be a centre for finance, but you interfere with the very thing that makes it work – the flow of money. Its like wanting Britain to be the world centre for omelets and then banning eggs.

“The UK has always enjoyed a reputation for being very thoughtful over its tax regime. If instead it bends to the sort of political expediency that led in the US to legislation such as Sarbanes-Oxley, then you could very well see, over time, people changing their perspective.”
Telegraph

That reputation has already been shattered, even if they do not bring these measures in. Britain has been shown to be an unfair player, an untrustworthy partner, a cheat. People need to plan years in advance when deciding to move themselves and there interests into a country, and if, as it appears, Britain can change the rules without warning, retroactively, no one with any common sense will risk putting their foot here. That is why people are already saying that they will not move their operations to Britain; it is out of fear that they will one day, without notice, be subject to some absurd regulation cooked up by a bitter, twisted civil servant in a shabby dingy office.

Which brings us to the title of this post.

If there is a Ron Paul Presidency, Sarbanes Oxley and the other myriad of insane market distorting laws are repealed, including the swinging income tax laws and the absurd ‘money laundering’ regulations, then businesses and executives and personnel from all over the world will head back to New York, surfing a cross-Atlantic tidal wave of money. Not only will Americans fuel a resurgence of the economy being unburdened, but a deregulated financial sector will also bring trillions into the country.

None of the businesses and personnel affected by this insanity actually WANT to move to Singapore and Dubai; they would MUCH rather stay in London, but they will all do what is required to stay free and unencumbered. And those two places are not so bad. New York is preferable to both of them, and there is the opportunity.

Even if all of this is not true, it is morally indefensible to firstly change the rules halfway through a game, and secondly, to try and rob people of their money in this shameless and convoluted way.

It is astonishing that these imbeciles did this without consultation or taking advice…it makes you wonder just how stupid they really are; certainly they do not have close connections to high finance and obviously they are disconnected from reality.

It is frightening that such unintelligent, detached people have the power to make law.

UPDATE!

This from today’s Times:

New ‘nom-dom’ rules

• From April 5 non-domiciled residents who have been in Britain for seven years must pay an annual fee of £30,000 if they want to be exempt from tax on their offshore income and gains
• Those who take advantage of this exemption will lose their personal allowances for income tax and capital gains tax
• Those who also pay tax in foreign countries won’t get credit for the £30,000 fee
• Tax will be levied on any gains from offshore trusts – this will be backdated for ten years
• All noncash assets, such as art and jewellery, brought into the country will be taxed – this will be backdated indefinitely
• All days spent travelling, where a passenger passes through Customs, will be counted as a day in Britain. Those who spend more than 183 days in the tax year in Britain are deemed to be resident

It sounds so absurd that your initial thought is, “This cannot be true!”; Tax to be levied back dated TEN YEARS? The statute of limitations is SEVEN YEARS except in murder cases…its breathtaking….non cash assets brought into the country backdated indefinitely does that mean that the jewelry of your parents and grandparents will be taxed? And just how are they going to pull this off? Are they going to get all these ‘non doms’ to list every object they own and demand they produce a receipt for everything they have ever bought?

Is anyone asking this question?!?!?

If you spend more than 183 days in britain, then you are deemed resident. So they are essentially banishing the wealthy from britain for one half of every year. That is one half of the year that these people will be spending their money in other countries, should they even bother to come back at all.

Total, unvarnished insanity.

And finally another excellent comment on this article:

Do we think we are the center of the art world and there are no fabulous alternatives? I was so sick of this ‘fleece the rich, hang the consequences’ attitude that I left the U.K. and came to America – sure there are problems here but looking a gift horse in the mouth is not one of them.

Which bright spark thought this policy up? Clearly not one with any vision or care as to what this will do to keeping Britain as a leading art power. Should other nations stand idly by as their art exports are taxed at 40% when entering the U.K. or should they reciprocate and slap a prohibitive massive duty on British art exports coming into their countries?

If this comes into law as proposed Britain is handing other world powers a golden opportunity to leapfrog our carefully honed position in the art world that has taken centuries to create.

This policy is pathetic and wreaks of envy, which, I am ashamed to say, is something that Britain can rightly claim to be the world leader at.
Another disgrace!
Peter, New York, USA

And there you have it. It seems like they are deliberately trying to make everyone leave britain. We have already read about the mass exodus of the ‘ordinary’ people, and now they are making the extraordinary flee also.

Good Job!

This entry was posted on Saturday, February 9th, 2008 at 2:12 pm and is filed under Insanity, Money, No no no!, Politricks, wtf?.