A combination of Corporation Tax, 50% income tax on higher incomes and 28% captial gains tax was always going to put some people off coming to the UK. The question was how many would it also send away.
Yesterday one of our large companies, Wolseley, announced it was going to the Channel Islands and Switzerland to get away from UK tax rates and the Inland Revenue. It follows Shire and Ineos, and various investment businesses. It should have come as no surprise, as some of us have been warning for some time that the UK is no longer tax competitive. It’s a footloose world out there for entrepreneurs and businesses. Other jurisdictions now are friendlier and set lower tax rates than we do, so people and companies take up their offers.
The British political class is indulging in one of its phases of moralising and bashing anyone with a bit more money than the neighbours. We are told they should not seek to minimise their tax bills. They should stay here and help the country pay off its debts. They may not be easily persuaded.
All this would be easier to sell if the political classes themselves sought to maximise their own tax bills. There have been cases of prominent Labour, Lib Dem and Conservative MPs, peers and donors who have taken good advice to lower their tax bills legally. I see nothing wrong with them doing that, but the parties should not then turn round and tell people taking sensible precautions to keep their own tax down that such an approach is unpatriotic, immoral or worse. Most sensible people seek to reduce their tax bills by legal means. The government itself encourages that with its tax shelters for National Savings, pension investment, ISAs, charitable giving, family gifts seven years before death and the like.
I found myself agreeing with Mr Darling yesterday. He said that it would be increasingly difficult to collect more tax from income and profits, as successful people and businesses will simply shift tax jurisdiction if the UK puts up its rates. He might have added the way to increase the UK tax take from the rich and successful is simple – cut the rates, then more will want to come here and stay here.