Mohammed Amin: A land fit for billionaires
Mohammed Amin is Vice Chairman of the Conservative Muslim Forum. He is writing in a personal capacity.
Meet Rupert from Ruritania. Rupert was born into a moderately wealthy family of Ruritanian cotton growers but with his business acumen has taken the family cotton business international as well as diversifying into other areas such as commodity trading, casinos and shipping. His business interests are now estimated to be worth about £20 billion. In addition he owns a diversified portfolio of investments, mainly quoted shares and bonds, worth about £2 billion, and also owns residences in many of the world’s more attractive cities including London.
Rupert is on good terms with the Ruritanian government but considers the country unstable. Accordingly all of his non-Ruritanian business interests are held through international trusts to avoid expropriation by Ruritania if the government changes. Similarly all of his liquid investments and cash are outside Ruritania.
Rupert and his wife both like London and a few years ago started spending most of their time here. Apart from anything else, the weather in Ruritania is awful! All three of their children are attending high quality, although rather expensive, public schools. Rupert’s wife likes shopping here, and is active on the London charity scene while Rupert himself concentrates on his business interests. For him the many attractions of London include high quality accountants, lawyers, trust experts, actuaries, consulting engineers and corporate financiers. While he regards such professionals as overpriced, he values their skills and makes extensive use of their services in his international business interests. He also uses London based asset managers to take care of his investment portfolio.
Quite apart from spending several million pounds a year purchasing professional services for his international business interests, Rupert also relies upon his cleaners, his cooks, his butler, his personal secretary, his chauffeur, his masseur and his security guards to itemise but a few of his staff.
Does Rupert benefit the UK economy?
Rupert’s choosing to live in London instead of, say, Singapore is of enormous value to the British economy. If he were not living here, Rupert would probably not be spending £2 million a year on professional services from London advisers. Nor would he be spending millions of pounds a year on his living costs, including his cars, his personal employees, the expensive restaurant meals that he consumes and the fine wines that he drinks, and of course the private school fees.
Rupert could be regarded as a one-man stimulus package for the UK economy!
How much does Rupert benefit the Exchequer?
Rupert’s personal tax bill of roughly £2 million per year is a dramatic underestimate of his total contribution to the Exchequer. Most of Rupert’s personal living costs (such as the motoring, the restaurant meals and the fine wines) are subject to VAT and various other duties as well. The wages of his personal staff are subject to employer’s social security contributions, and the employees themselves pay income tax and social security contributions which they would not be paying if Rupert had not employed them. The same is also true of the money that Rupert spends on professional services for his business interests.
Accordingly Rupert is contributing several times as much to the Exchequer as he thinks he is.
Some will complain that it is unfair that Rupert pays only a small proportion of his total economic income (if you include his international trusts and international business interests) in UK taxes despite living here. However if the UK tried to tax Rupert in full at 45% he would simply leave. That is why the UK keeps its special tax rules for people domiciled outside the UK.
The real failing in our tax system is that it encourages UK domiciled billionaires to leave the country since they don’t qualify for the special tax treatment Rupert receives. We should to extend “non-domiciled tax treatment” to everyone in the UK who wishes to apply for it, regardless of their legal domicile status. That way we would stop driving home-grown billionaires away. Also by making it clear that our favourable tax rules were permanent, we would probably attract more foreign billionaires to move to the UK. The more of the world’s rich that we can attract to the UK, the better.