Fed up with Rachel Reeves’s tax rises, with the calls for wealth and mansion taxes, and the loss of non-dom status? For $5 million (£3.95 million), there is now a very easy escape route. President Trump has just announced a ‘golden visa scheme’, allowing investors an easy path to American citizenship. That is aimed at attracting global entrepreneurs to the US. But it could also pose a real threat to the British economy.
The UK depends on a small group of taxpayers to keep its huge state machine financed
It is certainly a dramatic move. Golden visas that allow citizenship in return for investment have traditionally been restricted to a handful of micro-states and tax havens. President Trump has now decided to add the United States to the list. We will see how successful this is. Compared to places such as Dubai, the Caribbean islands, and Malta, best known for their golden visas, American taxes are relatively high. The footloose, tax-averse global mega-rich may just decide a US passport is not worth having.
In reality, the country that might be really hit is the UK. Sure, the visa will only appeal to a small pool of people. After all, not many of us have $5 million to spare. And yet, for anyone who does, the US is the country that the wealthy British have always found it easiest to move to. It has a vast range of cities to choose from, everyone speaks the same language, it has huge commercial opportunities, and world-leading universities. Most people already have friends and family in America. It is not a tax haven, of course, but taxes are significantly lower than they are in the UK, and under the Trump administration they are coming down. The people who are not sure about Dubai or Monaco may find it very appealing.
The real problem is this. Over the last 20 years, the UK has dramatically narrowed its tax base relying on collecting more and more money from the well-off. Sixty of the wealthiest people pay more than £3 billion a year in income taxes, according to a report by the BBC. They account for just 0.0002 per cent of UK taxpayers but paid 1.4 per cent of the country’s total income tax receipts. Likewise, last year, the top 1 per cent of income tax payers paid 28.2 per cent of income tax, up from 22.7 per cent twenty years ago.
In effect, the UK depends on a small group of taxpayers to keep its huge state machine financed. The Greens, the Liberal Democrats and the Labour Left keep arguing for that to be increased, insisting that the ‘rich’ should pay even more. But President Trump has just effectively put a cap on that, by offering them the US as a refuge. That will make it very hard for a British Chancellor to push taxes on the ‘wealthy’ any higher – indeed at some point she may even be forced to reduce them.
Comments