The Bank of England’s former chief economist warned that the government needed to be “a bit careful” that its proposed crackdown on non-doms did not put investors off the UK.
Speaking on LBC, Andy Haldane warned that the government’s measures might give overseas investors “cause for pause” before setting up businesses in the UK.
His comments came after reports this morning that officials at the Office for Budget Responsibility (OBR) fear the measures could end up costing the Treasury money.
The reports were dismissed as “pure speculation” by the Treasury, but Haldane said the “more important” question for the government was whether the measures would damage “sentiment about UK Plc”.
“Do (the policies) make it more or less likely people would park their money, set up their businesses here and therefore generate growth,” Haldane asked.
Phasing out the non-dom status was originally a Labour policy, but the measure was adopted by Jeremy Hunt in March to help fund his national insurance cuts.
The government wants to go further by removing a 50 per cent discount which exists in the first year of the new rules while also making inheritance tax payable on foreign assets held in a trust.
The moves have prompted warnings that non-doms might try and leave the country to avoid the planned tax rises.
A recent study from Oxford Economics, which polled 72 non-doms and over 50 tax advisors, found nearly two thirds of people with the tax status are planning to leave the UK within the next two years.
“If it were me, I’d be being a bit careful in not deterring just the flow of finance we need to get growth going,” Haldane said.
“I think what matters here is perceptions of the UK as a place to do business. Perceptions of the UK as a place to park money and nothing, I think, in the budget, I hope, will upset those perceptions,” he said.
A Treasury spokesperson said: “We are committed to addressing unfairness in the tax system, which is why we are removing the outdated non-dom tax regime so we can raise the revenue needed to rebuild our public services, and replacing it with a new internationally competitive residence-based regime focused on attracting the best talent and investment to the UK”.
