Rachel Reeves is accused of trying to ‘undo her own damage’ after watering down Labour’s non-dom crackdown following exodus of millionaires from Britain_Nhy
Rachel Reeves was accused of trying to ‘undo her own damage’ as she watered down her planned crackdown on non-doms yesterday.
Amid growing fears about an exodus of wealth creators from the UK, the Chancellor said she had listened to concerns and would amend her plans.
Ms Reeves told an event at the World Economic Forum in Davos that the Government will make changes that will result in tax treatment that is ‘more generous’ to some individuals.
It came as Business Secretary Jonathan Reynolds hinted that Labour could also alter its flagship workers’ rights package – which businesses say is loading them with costs and red tape.
The comment added to a series of leaks and announcements this week as ministers seek to win back the trust of businesses left scarred by last October’s tax-raising Budget.
Ms Reeves told an event hosted by the Wall Street Journal: ‘We have been listening to the concerns that have been raised by the non-dom community.
‘And in the finance bill, we will be tabling an amendment which makes more generous the temporary repatriation facility, which enables non-doms to bring money into the UK without paying significant taxes.’
Mr Reynolds said: ‘There is a tweak… of course when you’re changing a tax regime… there will be some uncertainty. We welcome people coming to the UK.’
Rachel Reeves (pictured) was accused of trying to ‘undo her own damage’ as she watered down her planned crackdown on non-doms yesterday
Labour veteran MP Diane Abbott accusing the Chancellor of listening ‘to the international billionaire class, but not to freezing British pensioners’
On Labour’s workers’ rights plan, the Business Secretary said that while it would not be ‘watered down’ after consultations, the ‘vast majority’ of concerns about it would be addressed.
Critics said the minor tweaks to the non-dom plan would do little to stop the exodus of millionaires fleeing Britain over the crackdown.
And Tory business spokesman Andrew Griffith said: ‘Having trashed wealth creators and businesses, Rachel Reeves is now trying to undo her own damage.
‘Any U-turn is welcome but this one is like turning off the ice cube maker in the cocktail bar of the Titanic.’
Meanwhile Labour veteran MP Diane Abbott accusing the Chancellor of listening ‘to the international billionaire class, but not to freezing British pensioners’.
The current non-dom scheme allows individuals living in Britain but domiciled overseas to avoid paying tax on income from abroad for up to 15 years.
That is being scrapped, in changes introduced by previous Tory chancellor Jeremy Hunt, in favour of a scheme that allows new arrivals to the UK to avoid taxes on foreign income for their first four years of residency. After that they will pay tax at the same rate as everybody else.
Under a temporary arrangement being introduced as the new rules come into effect in April, non-doms can bring overseas wealth in the UK and pay tax on it at a reduced rate for three years.
The Labour manifesto put the non-dom crackdown at the heart of the government plans, using revenues to fund a range of policies
Business Secretary Jonathan Reynolds hinted that Labour could also alter its flagship workers’ rights package – which businesses say is loading them with costs and red tape
But there have been complaints that complex rules over the treatment of money held in trusts would exclude them for the scheme. The Treasury said these were now being simplified.
Pressure to change the non-dom rules has intensified over the coming months amid fears that the crackdown and tax hikes announced in the Budget were driving international investors away and damaging the economy.
Recent figures showed that a net 10,800 millionaires left Britain last year, a 157 per cent increase on the previous year.
Rishi Khosla, chief executive OakNorth bank, this week told the Mail that it meant the UK was losing ‘growth drivers, who are the people who effectively have the entrepreneurial ambition’.
Treasury officials denied yesterday’s announcement was a U-turn, saying the changes had been in the pipeline since before the Budget.
A spokesman said: ‘They reflect our continued engagement with stakeholders to make sure the reforms announced at Budget operate as intended.
‘The Temporary Repatriation Facility is designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.’
Downing Street said the tweaks do not ‘change our approach’ to replacing the ‘outdated non-dom tax regime with a new internationally competitive resident-based system’.
But Dominic Lawrance, partner at law firm Charles Russell Speechlys, said: ‘If the Government’s only proposed solution is making minor changes to the TRF, it seems the Treasury is still failing to understand the issues which are driving this economically catastrophic development.
Tory business spokesman Andrew Griffith said: ‘Having trashed wealth creators and businesses, Rachel Reeves is now trying to undo her own damage’
‘If the exodus is to stopped, far more radical change is needed. The latest announcement looks very much like a rearrangement of deck chairs on a stricken liner.’
Ms Reeves and Mr Reynolds have been in Davos seeking to woo investors and global chief executives to Britain.
And they have sought to demonstrate their commitment to growth with a series of interventions including a signal that they will back a third runway for Heathrow and the ousting of the boss of the competition watchdog.
Meanwhile Ms Reeves is under pressure to scrap Inheritance Tax after a poll found it is seen as the most unfair of all levies.
The survey by Public First revealed that 55 per cent of Britons back cutting or abolishing IHT, with only 21 per cent supporting the current rate and 10 per cent wanting it to be increased.
John O’Connell, chief executive of the TaxPayers’ Alliance which commissioned the poll, said: ‘Our political leaders now need to listen to the electorate that put them in office and scrap inheritance tax once and for all.’
