The UK's financial services industry depends on non-domiciled workers, says the British Banker's Association (BBA).
In its response to the Government’s consultation on foreign workers launched last December, the BBA says the UK must remain open for business for the continued success of the economy as non-doms pay income tax on their UK earnings.
Angela Knight, chief executive of the BBA, says the financial services industry, which contributes more than £100bn to UK economic growth, has concerns that hitting workers with extra taxes would reduce the country’s appeal to quality workers. She says it also fears it would deter foreign investment in the UK economy.
The BBA says the treasury’s proposals to increase tax revenues from non-doms could cost the UK considerably more than the small amount it would raise.
The paper proposes to give people who have remained in the UK for seven out of the past 10 years paying tax on the remittance basis the choice of paying an additional £30,000 a year tax charge to keep the remittance basis or of moving to the normal UK taxation basis. The normal basis involves subjecting unremitted foreign income and gains to UK tax on an arising basis. Government estimates suggest this will raise an extra £550m by 2011.
However, the BBA argues the Government should defer its plans until it carries out a full impact assessment on the likely cost to the UK.
Knight says: “The non-doms already pay income tax to the Exchequer on their UK earnings, same as the rest of us. If they additionally have to pay a considerable annual levy on top, they will see this as a clear message that their presence is no longer valued by the UK, especially when considered alongside other measures the Treasury is proposing.
“The international view of the UK is that it is becoming by degrees less welcoming to business. If we put at risk our position as the centre of international finance, there will be countless other financial centres shaking out the welcome mats for those talented and industrious individuals who are currently contributing so much to our economic growth.
“These proposals would deal a devastating blow to the City, but would also affect those visitors from overseas who work in the arts, in research, in teaching, in medicine and many other roles. It could bring about a seismic change to our society yet the Exchequer’s benefit would be comparatively modest.
"We need more time for consultation with affected stakeholders and a full cost-benefit analysis to be carried out before these proposals go any further.”
The BBA also says the City has lost confidence in the Treasury’s consultation process.
It says: “Consultation must be both on the policy and the detail of implementation, as it is meaningless to consult on measures to iron out the defects of a policy that has been developed without reference to stakeholders.
"We fear that some stakeholders will consider that the lack of consultation on this policy change suggests a disregard for the individuals and businesses that these measures will directly affect.”
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