Ahead of the predicted Labour landslide, Britain faces a record exodus of millionaires, even as tax evasion remains rampant. Here’s the full story.
Wealthy Exodus
As the general election moves ever closer, the United Kingdom is witnessing an unprecedented exodus of its wealthiest residents.
Millionaire Migration Soars
According to a report by Henley & Partners, a firm which helps the ultra-rich to move to other countries when the evils of taxation threaten their precious millions, the UK is expected to lose 9,500 millionaires in 2024, more than any country except China.
Doubling Departure Trend
This figure marks a significant increase from the 4,200 who left in 2023, doubling the trend year-over-year.
“Vote With Their Feet”
The report, which compiles data on migration intentions of high-net-worth individuals, underscores a growing sentiment among the rich to “vote with their feet” amid political uncertainties and unfavourable tax changes.
Election Spurs Fears
The looming general election is one of the critical drivers of this exodus. With the Labour Party comfortably ahead in the polls, many of the UK’s ultra-rich are worried that the tax man may be coming for some of their millions.
Labour’s Tax Plans
Labour’s proposals to reform the tax treatment of non-domiciled residents, a UK resident who, for tax purposes, has their permanent home outside of the country, coupled with the potential imposition of VAT on private school fees, are seen as threats to the financial privileges currently enjoyed by the rich.
Seeking Stability Abroad
This has led to a sense of urgency among the ultra-rich to seek more stable and favourable tax environments abroad.
UK: Once a Wealth Magnet
Historically, the UK has been a magnet for global wealth, attracting wealthy families across Europe, Asia, Africa, and the Middle East. London, in particular, has been a hub for the rich due to its robust financial sector and attractive living conditions.
Brexit’s Impact
However, the trend has reversed recently, with Brexit and subsequent economic challenges diminishing the UK’s allure.
Dubai’s Appeal
The United Arab Emirates, particularly Dubai, has become a top destination for these fleeing millionaires. Offering zero personal income tax and a business-friendly environment, the UAE is set to attract 6,700 wealthy individuals this year.
Tax System Overhaul
Both major political parties in the UK have pledged to overhaul the tax system for non-doms, which is anticipated to drive even more wealth out of the country.
Closing Loopholes
Labour’s manifesto includes plans to close loopholes that allow non-doms to avoid inheritance tax on assets held in trusts, a measure expected to raise £450 million annually.
Funding Public Services
This is part of a broader strategy to increase tax revenues to fund public services, such as cutting NHS waiting lists and introducing free primary school breakfast clubs, services which the rich are unlikely to want to pay for.
Anxiety Among Wealthy
However, these changes are causing significant anxiety among the wealthy, an anxiety which Henley & Partners is all too happy to ease.
“Golden Passports”
Henley & Partners does this by helping the ultra-wealthy avoid taxes by so-called “golden passports,” which allow their clients to move to countries with significantly looser taxes.
Controversial Clients
This has not always gone well for Henley & Partners. In March 2022, the Organized Crime and Corruption Reporting Project (OCCRP) released a report revealing how the firm assisted a “bevy of high-risk clients” in obtaining citizenship, including several individuals with dubious backgrounds who were subsequently sanctioned or convicted of crimes.
Ineffective Tax Crackdown
However, many of the ultra-wealthy needn’t have bothered. Despite the UK government’s tough rhetoric on cracking down on tax evasion, actual enforcement has been non-existent.
No Fines Issued
Since new laws in 2017 aimed at penalising enablers of offshore tax evasion, not a single fine has been issued.
Targeting Enablers
These laws targeted accountants, lawyers, and bankers who facilitate tax evasion, with potential fines running into millions of pounds.
Unused Powers
Yet, figures obtained through freedom of information requests by The Observer reveal that these powers remain unused, casting doubt on the government’s commitment to tackling tax evasion and creating a fairer tax system for those who cannot avoid tax.
HMRC Criticized
His Majesty’s Revenue and Customs (HMRC) has faced criticism for its failure to deploy these powers effectively.
Offshore Initiative Revenue
Despite its claim of securing £700 million from offshore initiatives since 2019, critics argue that the lack of penalties for tax evasion enablers undermines these laws’ deterrent effect.
UK’s Tax Gap
The UK’s tax gap—the difference between taxes owed and taxes paid—currently stands at £36 billion, which is considerably less than £700 million.
Election’s Impact
As the UK braces for an election that could significantly alter its economic landscape, the ongoing exodus of millionaires highlights the growing problem posed by the ultra-wealthy moving abroad so as not to pay taxes.
Public Services at Risk
This trend threatens to deplete the country’s tax base and highlights how ineffective enforcement of tax evasion laws can lead to public services being underfunded as HMRC is simply unable to collect the taxes it is owed.
Future Uncertain
As the election draws ever closer, it remains to be seen if some of the world’s wealthiest individuals will carry out their threat of leaving the UK in the face of slight tax rises.
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