01 October 2007

Osborne does well

When I finally made it out of bed just after 8am this morning, I was just in time to hear George Osborne on the Today programme announce the most original and intelligent new policy of any political party in decades. A flat levy of £25,000 on non-domiciled tax payers is a creative way of raising money from a completely new source without the tax payers seriously resenting (or in many cases even being effected by) the new tax. Anyone earning more than about £70,000 per year offshore will be paying a lower effective rate of tax on this income than if they brought the money onshore and in many cases (e.g. US citizens) will be able to off-set the £25,000 from their other tax bills under double tax treaties.

It is very unlikely that there are many non-domiciled tax payers who are low earners - a nurse from overseas is hardly likely to have a private income arising in her home country which makes it worth claiming non-dom status, or whether she would have registered as such - she would pay tax on her UK income via PAYE and that would be that. This means that very few of the non-dom tax payers included in the statistics will not contribute more under this proposal.

The criticism that it would not raise "enough" money is a red herring - it will raise new money - that's the point.

On the other hand IHT will be abolished for the majority of people. The criticism that this is a re-distribution from the very rich to the quite rich and therefore irrelevant to the majority of people is again misplaced. The idea that policies should only be developed that help the poorest - or the majority - is foolish. For one thing, a government needs to look at all aspects of the tax system. Secondly, in an aspirational society, people look at the taxes which will effect them if they get rich. Historically, tax cuts for the rich have stimulated growth and lead to an increase in tax revenues. The Conservatives have always prospered when they have pandered to the aspirational nature of the British people. The policies announced today are creative and sensible and are, I hope, the first of several good ideas which will mean that the Conservative Party forms the next government.

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