I first write this blog in 2010, but I think it's time to bring it out again in the the light of all that has happened since and the need for new tax revenues.
As readers of this blog will know I have for some time proposed a ‘passport tax'. As I have said previously:
The principle is simple: if you have the passport you pay tax on your worldwide income unless tax resident in a state with a full double tax agreement with the UK (which is why we should give them sparingly) .
To give up the passport you would have to break all ties with the UK — including any right to return. OK, European cooperation would be needed on that, but I don't see it as being hard to secure.
I note that this weekend the Telegraph suggested:
A new ‘citizenship tax' for all British passport holders — including expatriates — could help a hung Parliament ease ballooning budget deficits without hurting most voters, accountants claim.
They say Britain may follow the American Internal Revenue Service example and require every citizen to file tax returns regardless of their country of residence.
Following [the] inconclusive general election result, this option could appeal to a coalition government desperate to balance the books. It would raise substantial extra revenue without costing existing taxpayers a single penny more.
However, expatriates who currently pay little or no tax to HM Revenue & Customs (HMRC) could soon find that retaining their passport would cost much more than its current £77.50 issue price. Now that nearly one in 10 British citizens lives overseas — that's a total of 5.5m expatriates — the new levy could be worth billions.
As they add:
Funnily enough, the first man to tell me that Britain might follow the American example of a citizen tax hastily emphasised that his name must not be linked to it. Without wishing to compromise his confidentiality, it's fair to say his international private bank earns part of its profits by advising wealthy globe-trotters on how to avoid tax.
I have a strong suspicion I know who that person is. I also know that if I'm right he's very familiar with my thinking and is no doubt reiterating it.
He's also in that case right to know that it would raise a significant sum — we both have good reason for thinking it would. Which, rather perversely is why it has not happened, yet.
Might it? Some suggested not. For example:
Richard Mannion of accountants Smith & Williamson said: “Clearly the government is going to need to find extra taxes in the foreseeable future — so nothing is off limits. This system seems to work well for the USA and is regarded by Americans as the price to be paid for the green card.
“However in view of the lack of experienced staff in HMRC I do have real doubts about their ability to police any new system like this.”
Others sought to express similar doubt. They're wrong to do so. This could work very well.
First, note no one living in Europe would be subject to it. I suspect that would have to go without saying.
Second, I think there would be a “white list” of states to which it would not apply. Like the US and other major states such as Japan, Australia, Canada and so on where the tax system is considered robust, information exchange is good and double tax treaties work.
Thirdly I'd propose it applied to no one earning less than the income tax higher rate tax band — so taking all working voluntarily overseas, for aid agencies and the like right out of the charge. This replicates a US provision.
After that you're left with the cases you want to tackle: those living in states with no tax agreement with the UK, with UK citizenship and wanting to retain it and with substantial potential tax being avoided by their residence abroad — probably in a tax haven.
Yes they'll squeal and the Crown Dependencies will say this is unjust as they're not UK citizens — which I'd agree for those with genuine claim to be local (which is rigorously defined, remember in the case of Jersey and Guernsey at least). But the reality is that this will massively clamp down on tax abusers.
And who better to pick up the pain right now.
My ‘colleague' who might have been talking to the Telegraph has a conscience I think. My guess is that's why he's been talking. He knows that this is just. Precisely because it could bring in billions now that we need them at no cost to the honest people of the UK.
Bring it on, as I think some say.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I think you are very much glossing over the EU problem and you know it!
If people have to hand back their passports but can just get a Maltese passport (or other small state in the EU) which allows living and working in the UK then it will achieve nothing…….
Solve the problem of the EU, freedom of movement and freedom of capital first……then we can talk about a passport tax…..
People won’t do that
Well, a few will
But in the US it’s 1,000 or so a year
So shall we get real here
We can also introduce stickiness….5 year post exit charges
I don’t think you’ve answered the question here. The comparison with the USA is false. A US passport does not allow you to live and work in the EU. A Maltese passport would allow you to live and work in the UK so why would the loss of a UK passport be particularly deleterious?
As for exit charges, in the context of the EU they are almost certainly illegal as a restriction on the freedom of movement and capital (whether those things are good in themselves is beside the point). The EU has been gunning for the UK’s CGT exit charge for a long time now.
The fact is, in this day and age, passports are becoming increasingly irrelevant. In the context of the EU they practically already irrelevant.
Not a view they hold at the Treasury, to my knowledge
“Which is why we should give them sparingly”.
Let’s leave aside the delusion that the UK “gives” DTAs rather than negotiates them as equals with sovereign nation states. Let’s instead consider the very great number of treaties the UK has. “Sparingly” if it to have any meaning – not a given in my view – would require us to withdraw from treaties. From what percentage of treaties do you propose we withdraw in order to acieve ‘sparing’?
P.S. As someone with strong African connections I note your list of “white list” states doesn’t include a named African country; well it wouldn’t would it. Once again I am safe in the knowledge that the Courageous State will not have the courage to post this comment.
The idea of what is in effect multilateral withdrawal ie renegotiation, is on the table
“To give up the passport you would have to break all ties with the UK — including any right to return.”
Well that’s one way of fixing the backlog at the passport office.
But almost no one would
So how would you deal with the hundreds of thousands of South Africans with hereditary British passports?
Are you going to force them to give up their passports? Or are you going to force them to pay tax twice – in the UK and SA?
Surely someone should pay tax where they live, not depending on what passport they carry?
First there is double tax relief
Second, no know is being denied a passport if they give one up
Thirdly, whT you are actually saying us passports have value – I am saying that should be paid for
So, from how many treaties would you withdraw to reach ‘sparing’?
The number needed at the time
“Well, a few will …. We can also introduce stickiness….5 year post exit charges”
Thus proving the Courageous State is actually spiteful and vindictive.
Only if you consider upholding the law evidence of such a characteristic
I have a very strong suspicion most don’t
We already have such stickiness e.g. Re CGT and non-residence. I am hardly being radical
The CGT 5 year rule means you need to stay out for 5 years to avoid CGT while still being a British Citizen. You are talking about someone having given up their UK citizenship still paying to the UK even when they are no longer a citizen or resident. Truly taxing foreigners abroad on their non-UK income!
No, beating avoidance
Something very different
What income are we talking about here please? UK arising,Foreign arising?
How will foreign income be assessed / collected ? How will HMRC know who has not submitted a Return? They can’t even do that for the UK…………
Worldwide
Automatic information exchange makes this possible
And this is self assessment
Sorry Richard “the number needed at the time” is ducking the question; another feature of the Courageous State. The UK has a very extensive network of DTAs. If you are going to “give” (how I love your use of that word) them sparingly then most, MOST will need tearing up. Your white list does not presently include one single African nation. I challenge the Courageous State to name those African nation states with which it WOULD seek to have a DTA.
Again, I do expect the Courageous State to show its true colours here and not answer.
I have answered
These things happens by negotiation
As such my answer us complete
No sorry, your answer cannot be complete if you can’t tell us what ‘sparingly’ means. I’ll give you a clue: we won;t have one with the majority of states if we only “give” them sparingly.
Your concept of a white list including what you call “major states”, meaning other states aren’t “major” and should be excluded. You were able without prompting to name certain countries on the ‘white list’, without laying our any criteria ans you acknowledge that EU countries will need to be included. Yet you have not included A SINGLE AFRICAN OR SOUTH AMERICAN COUNTRY ON THAT LIST.
Do you think it’s time you do what you normally do when you back yourself into a corner and tell me “you’re wasting my time. Don’t call again.”
I have answered the question
If you don’t like the answer that is entirely your problem
I suspect that Commonwealth citizens ENTITLED to a British passport (who are British born, or get it from a parent or grandparent) would run into millions. Most will also be citizens of the country where they live. I know plenty.
Many will never have even applied for a British passport. However, if they turned up to the High Commission in Canberra, Wellington or Ottawa with the right papers, they would be just as entitled to a British passport as you are.
You’ve said you will not apply this rule to residents of ‘white list’ countries. But what if anyone above (travelling under, say, a NZ passport) moves to a place not on the white list?
It is very unlikely these people will notify the British government of their movements let alone complete a UK tax return. It just won’t occur to them.
Will these people become tax evaders?
And how will Britain keep track of these people? They don’t now as far as I know.
And how many will move to these non-white list countries? Depending on the number and type of countries on that list, I suspect it may be a small proportion. So you’re suggesting having a vast infrastructure to keep tabs on millions, just in case some of them might move to one of these countries.
Can you explain how you expect this problem to be solved?
If you say ‘strip them of their rights to the passport’ — well, I don’t see that happening. No British government would want to antagonise the Commonwealth this way.
And that is the nub of the issue: British passports are tied to a certain history and a diaspora. The US situation is quite different.
You clearly have no clue how hard it is to get a UK passport
You go downhill from there
I’ve done it (for my middle daughter soon after she was born in Sydney). It was not much harder than getting my Aussie passport. Get the paperwork in order and bingo.
Australia and NZ are full of people with these British ties. They’re everywhere – I have cousins, classmates, friends, neighbours who have done it. It is far from the rarity you suggest.
If she has British passport patents at the time of birth of course it was easy
But that’s not the situation you think commonplace
There are over a million South Africans who have ancestral British passports. You don’t have to have a British parent to get one even, just a British Grandparent. The same goes across many of the commonwealth countries.
So what?
If they don’t have it they need not pay the tax
And most Commonwealth countries would be on the ‘non-taxed’ list
No one is suggesting a tax on hypothetical taxpayers
But if then that British passport holding South African then moves to a tax haven? Does he/she then owe tax in UK unless they give up their British passport?
For example, my boss. He was born in Mauritius (a tax haven), but has a British passport (no others). He works in South Africa and has done so for many years, and has South African citizenship and permanent residency, stamped into his UK passport. He currently pays all his taxes in SA, but if he moves back to Mauritius would he be liable for UK taxes under your rules, unless he gives up his UK passport?
Yes
Very obviously
That’s what I am suggesting
So basically you are saying that holding a UK passport means you either have to live in a place that the UK government deems fit in tax terms, or you have to pay tax on your worldwide income. I’m not sure how UK passport holders who happen to live in places not approved by the UK tax authorities would feel about this.
More importantly, your idea is utterly unworkable in reality. The mechanism to remove someone’s passport and leave them stateless is incredibly complex, expensive and lengthy. In practice, it is near impossible, especially if it is their only and primary passport.
So, the only option for the UK government to prosecute a non-UK resident UK passport holder for not paying UK tax on their worldwide income would be through the UK courts for non-payment of tax. Again, I’m not sure how practical it would be to try and chase down hundreds of thousands of people not living in the UK, work out how much they actually owed then try and prosecute them for it.
On another related topic, I don’t understand why you have a problem with non-dom UK passport holders paying tax in other countries. If they don’t live in the UK, surely they should be subject to taxes in their country of residence, or at least where they are earning the money. Do you not agree that “the right amount of tax should be paid at the right time in the right place”?
If so, why does the UK have a right to tax someone on their worldwide income when none of that money was earned in the UK, they don’t live in the UK etc, just because they hold a UK passport?
We live in a world of self assessment
When this mater was discussed at the Treasury (and I assure you it was) the feeling it was in the ‘not yet’ box
Wait and see I see
I think you will find it’s time will come
And with automatic information exchange and mutual assistance the idea of collection becomes much easier
Not easy but much easier
You are fighting against impossible odds like a cart horse from another age
And why charge for the passport – because it is the social contract….simples, as some say
I’m not sure you are really answering the questions I put forward.
You can’t deprive someone of a passport except in the most extreme cases. The fee for getting one is an admin fee, not part of a social contract.
I assume if you want this idea that UK passport holders are due tax on worldwide income, then other countries would have the same right to tax their citizens on a worldwide basis as well?
What about UK passport holders who are not UK citizens?
Who would have the first rights to said tax? The country where the UK passport holders reside, or the UK?
Who would put up the costs for all this information exchange and collection? Indeed, would it even raise enough revenue to cover those costs?
I can see huge practical and legal landmines – the likely only winners to such a system would be tax and human rights lawyers.
We have ample means for preventing double tax
Automatic information exchange is on its way
Source countries always have first tax claim
All easily answered
Have you lived in another Commonwealth country?
There are British (or first or second generation Brits) everywhere in Australia, and I think it is pretty similar in NZ, Canada and South Africa.
And I don’t think the process of getting a passport (or a right of 4 years residence leading to a passport) is any harder for them than it was for my daughter. Why should it get harder when you leave babyhood? I know 80 year olds who got their first British passport, thanks to a grandfather who left Britain when Queen Victoria was still on the throne.
You are proposing a set of rules that would result in such people becoming tax evaders if they move to a particular country.
Not if they do not have the passport
Shall we get real here?
Sorry, I assumed your reference to a passport meant being ‘eligible for one’, not necessarily actually having the passport.
Doesn’t that create a fairly obvious (and entirely lawful) way to get around this for British people living abroad?
And even if you have to ‘have’ the passport, how do you keep track of them? My uncle lives in Oz but has a British passport, but I don’t think he keeps the British government (or indeed any government) informed of his movements.
It raises another point – does Britain want its diaspora to get rid of their British passports? I would have thought it was an easy way for Britain to maintain its ties across the world.
These are questions the tax would raise
I do not think there is any chance of assessing people without a passport
The obligation would be self assessment
There would be evasion as there is now
But there would also be compliance as now too
And you will have noted the numbers involved may be small – but probably of great tax significance
This is a targeted anti-avoidance measure
“To give up the passport you would have to break all ties with the UK — including any right to return. OK, European cooperation would be needed on that, but I don’t see it as being hard to secure.”
That simply isn’t going to happen and you know it. Any citizen from an EU country can live and work in any other EU country. As for “European cooperation”, this is complete pie in the sky and makes you sound just like David Cameron trying to get all these powers back from the EU. It ain’t going to happen. And deep down, like Cameron, you know it. It’s just political posturing.
“People won’t do that
Well, a few will
But in the US it’s 1,000 or so a year
So shall we get real here”
So what was the point of writing the first paragraph I quoted then? Either this is going to be a major problem which requires “European cooperation” to resolve, or so few people will do it that it is hardly worth worrying about. Which is it?
And can you explain what the 1,000 figure is please (and where it comes from), as I’m not sure you’re comparing like with like. Is it the number of people surrendering US passports? If it is then you’re ignoring the fact that in the EU one can surrender a passport in one country but still live and work there due to freedom of movement. This situation is not akin to the US.
I have answered all these points already bar the 1,000 – which is a figure on those giving up US passports last year – and is approximate quoted from memory and notable for being so small
I do not think most will be swapping UK passports with the ease you think
So, based on an earlier answer, South Africa is on the “white list”. (What a term to use!)
So a South African could move to the UK, become a citizen and then one day retire back to South Africa – no problem. If, however, he happens to come not from a state you deem not to be “major” – and if we’re going to “give” DTAs sparingly then there won’t be many of them – then he will lose his passport when he moves back after retirement unless he declares his worldwide income.
And, as we won’t have “given” a DTA to that state, this will include income that is chargeable in that state.
And, as our DTAs will be given “spairingly” many, most, of those states you deem not to be “major” will not be tax havens but may well be GOOD AFRICAN NATIONS THAT NEED HIS TAX REVENUE.
And as the “major” states will necessarily incldue Malta, Cyprus, Ireland. Netherlands, Luxembourg -thanks a lot Courageous State from the world.
The term white list is used internationally e.g. By OECD
Please note all the exemptions I have already suggested
As far as I can see you are intent on building straw men and wasting my time
“And why charge for the passport — because it is the social contract….simples, as some say ”
But it clearly contradicts your oft-repeated mantra that paying the right amount of tax means doing so at the “right place” at the “right time”. Applying your favourite mantra, there is no way that taxing a UK passport holder who has never stepped foot in the UK, but lives in Australia, on their bank interest arising in South Africa, can ever be described as being the “right place” at the “right time”.
Can you not see that contradiction? Or can you see it, but nonetheless override it because you see the ‘passport tax’ as a source of further tax revenue? The problem for you is that if you feel able to discard your mantra at will then others will reasonably regard it as nonsense in the first place and of no practical use whatsoever.
Are there any other circumstances where the “social contract” overrides the “right place, right time” mantra? And if so how does one decide whether it is worthy of being overridden?
The UK is the right place
They are UK passport holders
If that is not a definition of attachment to place, what is?
There is no contradiction at all, only confirmation of the stated intent that I repeat, as you say, often
I am in favour of sourced based tax first and residence second for individuals and companies with a unitary back up for companies
Using Chris Howker’s example above, and you being in favour of source based tax first then residence second, surely the place for the tax to be paid by an Australian based UK passport holder on South African investment income is SA first, then Australia. Where does the UK claim to such tax arise? Because the guy happens to have a UK passport?
This idea of yours directly conflicts with your country by country reporting. The guy in this example has no links to the UK other than a passport, and earns no money in the UK. So why are you saying that the UK has any claim on his income? In CbC you keep saying that the tax should be paid where the money is earned. Yet for individuals you are basically saying that the UK should put some countries on a naughty list, and if you happen to eanr money there and have a UK passport you are liable in the UK for it!
You also seem to suggest that such a law would raise tax revenues in the UK. I assume that if the UK implemented such a rule other countries would follow suit quite quickly. So what about the tax revenues lost in the UK because foreign passport holders in the UK would now have claims against their taxes from their own home countries?
UK not in your example
Australia would undoubtedly be on a ‘white list’
And please understand that country-by-country reporting is an accounting system and has never, ever, been a taxing system
You really are clueless, aren’t you?
I am now deleting you henceforth for that reason
Just to add:
“They are UK passport holders. If that is not a definition of attachment to place, what is?”
Legally, residency is the definition of attachment to a place, not what passport you hold. A passport is simply a travel document and test of nationality (again legally, a passport does not define your nationality).
Law can be changed
You may have noticed
What exactly do you mean by SOURCE based first and then RESIDENCE second?
Does this mean that if source rules do not apply to an item of income, you would revert to taxation by reason of residence?
Or are you seeking to tax income on the basis of residence and source with foreign tax credit for taxes paid outside the UK? Or would you like to see foreign income exempt from taxation on the basis of residence?
Tax at source first and then on residence and if a difference after credit for tax already paid charge the excess on a residence basis
How hard is that to understand?
Especially as you should be pretty familiar with it
“I am in favour of sourced based tax first and residence second for individuals and companies with a unitary back up for companies ”
Given that the holding of a passport is an indication of neither the source of income nor the residency of an individual (don’t for one minute conflate residency with holding a passport), you have essentially torn up your idea of a passport tax.
Sorry, but now I’m really confused.
Passport would be an extension of the definition of residence
What is hard to understand in that?
And yet the current global trent is to move from residence based taxation to a territorial or sourced based regime.
I know
I am opposing that
Speaking out against what I think is wrong is what I do
“I think you will find it’s time will come”
I’ll be honest, I don’t know if its time will ever come, and nor do you. But I have to say I would be very surprised if it did, the way the world is going.
Globalisation is leading to borderless states – the EU is a prime example. You don’t need a passport to travel in the EU. The Schengen agreement covering the very few states to which this does not apply surely won’t last forever. Our descendants may look back in 100 years and think the idea of a passport (which only dates from WW1, incidentally) quite quaint.
One thing is for sure: if a passport tax does ever arise, it will certainly be going against the tide of history.
Passport is used as a metaphor here for something much bigger – and please do not pretend you have not realised that
1. Thank you for doing exactly what I said you would do and hiding behind your “wasting my time” mantra.
2. No, no, no! This is not a straw man. It is most definitely NOT a straw man to say that the Courageous State wishes to withdraw from DTAs with most countries of the world and doesn’t consider most states “major nations” – you wrote these things explicitly in your post.
3. There are plenty, plenty of Brit ex-pats (not straw men) working around Africa and South America – in countries that are not on your PERSONAL “white list”. There are plenty of British peple currently in the UK with strong links with countries of origin and plenty of Brits who have retired back to those countries. This is not a straw man.
I am very sorry if on reflection your posts cause you embarrassment and if you feel the need to delete comments to hide that embarrassment. However, withdrawing from DTAs would cause serious damage to inward investment and trading relations for a large number of African countries. I cannot accept such an appalling world view to passing without challenge.
Read this
http://www.taxjustice.net/wp-content/uploads/2014/07/Krishen-How-Developing-Countries-can-take-Control-of-their-own-Tax-Destinies.pdf
We don’t even recommend DTAs to developing countries because they are usually very harmful to them
That’s a pro-developing country view
Yours a pro- developed country view
And you’re still wasting my time
Absolutely fascinating. My grandfather was a New Zealander. Came over with the ANZACS. The Gallipoli excursion & fun-fair. (Wonder why he bothered now) You can have my UK passport with my compliments. I’ll get a NZ one. Why would I wish to return to your horrible little island, anyway?
Go get if that’s what you want
So your policy doesn’t apply to ‘white list’ countries where we have a treaty in place.
But then it will apply to developing countries who might, at the moment, be offering tax breaks to UK individuals to come to their country to provide skills & expertise to help them develop. However, those tax breaks would now be worthless as you would be seeking to tax UK citizens anyway. This would be harmful to those developing nations.
You also talk of information exchange and co-operation but you’d be asking this from countries where you had in effect told them that you didn’t trust them on tax matters. Hardly a starting point for co-operation.
Then there’s the possibility of being resident in a country on your ‘white list’ but being tax resident elsewhere. How on earth would you monitor that? You’d need a small army of civil servants (although I’m sure you would say that was a good thing in itself, even if achieved nothing).
And not only would you need to re-write or withdraw from tax treaties, you’d have to re-write huge swathes of tax legislation.
And while the number renouncing US citizenship is small (although rising, it was c960 in 2012 and c 3,000 in 2013 following the introduction of new tax laws) they are often the very wealthy, the people you say you want to target and the ones most likely to renounce their citizenship. It is a relatively simple matter to become a citizen of, say, Cyprus which would grant you full working & access rights to the UK (and if you think getting EU co-operation to change that would be simple, you are seriously deluded.)
And all for what? To target a small number who would find it simple to side-step.
No, this is another simplistic idea of yours which your proffer as a source of great tax revenue but which would in reality be an unworkable legal and bureaucratic nightmare and achieve nothing like you pretend.
You have clearly not read what I have proposed
I read exactly what you proposed.
You propose a tax levied on world-wide income for UK passport holders residing in non-EU states which do not appear on a ‘white list’ of states whose tax regime you approve of with the risk of forfeiture for those who are not compliant;
“…you’re left with the cases you want to tackle: those living in states with no tax agreement with the UK, with UK citizenship and wanting to retain it and with substantial potential tax being avoided by their residence abroad”
You are simply unable to answer with the points I have raised which show how unworkable your proposal is.
To the best of my knowledge I have answered them all
Repeating them won’t change the answers, however much yon think UT might
Debate over, I think
“Go get if that’s what you want” absolutely brilliant; come to our Courageous State.
And yes, I see the Tax Justice Network actually really does advise nations not to sign any DTAs and to say to potential investors “come here and run the risk of double taxation, especially with the Courageous State on the loose.
Thank God for Africa that it has abandoned your advice, with the result being its fabulous growth over the past decade.
We’re not alone
So do the US based Tax Analysts – and for the same good reason
Not an ex PWC partner wrote the TJN note
We know what we’re saying
Wow. Most of your comments about PwC are negative and critical. But now one of them works for tjn apparently it’s fine to believe everything they say!
Former may be a key word
Mr Murphy –
If I may, I would like to make two observations:
First, I find it very questionable that this initiative would raise any significant revenues. The majority of UK nationals living overseas reside in EU member states, in the United States, or in developed countries of the Commonwealth that are also members of the OECD. The small fraction of UK expatriates living outside of these “white List” jurisdictions would undoubtedly be very small, and many of those would be able to claim non-domiciled status to shield them form non-UK sourced gross income. In short, it would be interesting to see what revenues you are projected to generate, and from how many taxpayers. We all suspect that it would be almost negligible.
Second, this policy would be almost undoubtedly unenforceable. How would you convince jurisdictions outside of your “white list” to exchange information about their own residents? Even the CRS model currently developed by the OECD does contemplate the exchange of information about the deposits of NON-resident taxpayers (incidentally even this model is almost certainly dead on arrival due to the opposition of the US Congress). In order to enforce compliance with your proposed passport tax, you would need to obtain information that goes significantly beyond that contemplated by the CSR.
We appreciate your intellectual contribution to this debate, but you don’t appear to have thought through any of the practical implication of your policy proposals.
Warmest regards, MR
You have yet to think any tax will raise revenue
Nor do you think anything – such as the European Union Savings Tax Directive – will ever be enforceable
Time and again you are wrong
So thank you for your contribution, but as ever, I think you wrong
Mr Murphy –
Thank you for your answer. I find it May I respectfully ask you to clarify the following points:
– provide an order of magnitude of the revenues you expect your passport tax to generate, and of the number of taxpayers who will liable for it;
– outline the enforcement mechanisms you propose to apply to ensure compliance from non-residents, living in jurisdictions that are under no obligation to provide information to HMRC.
Warmest regards, MR
A) I have not estimated: this us in part a revenue protection measure
B) Penalties on seeking to enter the UK
Richard.
So, you are an Irish passport holder as you’ve told us before. So you would happily be paying the (higher) Eire tax over and above your UK taxation? To a society you don’t live in nor gain benefits from?
And a second point. Don’t you think that demanding taxation from the vagaries of the circumstances of someone’s birth is a little like slavery to the State? That you should pay tax on where you choose to live is fair enough. The State is offering a deal that you can accept or reject. But, to come back to your situation. Eire decides to have 90% taxation on household incomes over £50k. Just imagine.
Happy to pay that given your background?
I would have to decide on a passport – which is the clear implication of any such arrangement
Which would be a fair enough demand
As for a slave to the state? Any tax makes you that in your view Tim so I don’t think we’ll take that seriously
“I would have to decide on a passport — which is the clear implication of any such arrangement
Which would be a fair enough demand”
Ireland (along with other countries with a diaspora – UK, Greece, some of the Baltic states) WANT their diaspora to have the passport (or at least the entitlement to it).
It helps give a connection to the motherland. And the diaspora who become influential in their new home countries may be likely to view their ancestral home kindly. It is a cheap way of maintaining good foreign relations.
So to design a tax system to force this choice would antagonise a lot of people unnecessarily, and would be counterproductive. I can’t see the UK or Ireland doing it.
But as you’ve said above, to pay the tax, you just need to relinquish the actual passport, not the entitlement to it. So it seems a harmless enough proposal.
When you add in that exit tax you seem to want to charge it really is all rather like purchasing your manumission, isn’t it?
As I have said before, only in the mind of someone like you Tim
And thankfully few share your worldview, whatever you might like to think
Dual citizenship is a marvellous thing and I am very lucky to be a national of both the UK and the German Federal Republic.
I face a dilemma after reading a thread like this one because there are times, (like this evening, when my wife who was born in Rio declares she is married to a German) that I feel my Prussian background in the ascendant. But at the same time, I have a sense of regret that back in Brandenburg we have no Mutiger Staat.
If I were to retire now and move permanently to my charming, comfortable and refurbished tea-planters bungalow in the hill country of Sri Lanka, should I relinquish one of my passports and if so which one?
Up to you
Well yes, I suppose so. However, I was hoping for more guidance from an acknowledged expert with strong and considered views on the subject.
I’m sorry, but just because I write a blog does not mean I provide a personal service
That just is not possible
This is my spare time activity
Of course I appreciate that but my question related specifically to the hypothetical and exciting proposal you are positing here.
It was within the scope of your thread rather than some probable ‘real world’ situation that I was asking the question.
Naturally if I were seeking your professional advice, I should expect to have to pay quite steeply for it though, after the expense of doing up my place in the hills, I might arrive at a cheaper and more traditional solution by simply bribing a few officials.
And I reiterate my answer
I think I have dealt with all questions at this stage
Dear Mr. Murphy,
I think it’s very courageous of you to want to take money out of the economies of poor, developing countries to feed the gaping tax maw of the rich UK with a citizenship tax. Not only does this take money out of their economies that could be circulating and doing good, it also erodes their domestic tax base – money paid to the UK in tax for no services rendered is not being spent locally and attracting GST/VAT.
I believe we have a word for taking money out of poor countries and paying it to rich countries – begins with “IM” and ends in “PERIALISM”.
Furthermore, what happens when the other countries involved start demanding reciprocity of the UK, and the right to tax their nationals in the UK?
And the US system is not one to look up to – they do not recognise most “foreign” pension schemes, so tax them. So US citizens can’t save tax free for a pension if they live outside the US. They also often treat the employer’s NI/pension contributions as taxable. ISA’s are treated as Passive Foregn Investment Companies, and are taxable and reportable on multiple forms.
Furthermore, due to currency fluctations, real, local losses can be taxed as phantom capital gains (e.g. person living in a country with local currency A, A:$ starts at 1:1. Assets worth 100,000A, = 100,000$. In a year, portfolio loses 10%, drops to 90,000A. However, $ drops 20% against A to 0.8:1 (think 2007, 2008), meaning that the assets are worth 112,500$. US gain = 12,500, taxed at say 20%, so $2500, which 2000A. So, our chap makes a LOSS of 10,000 in local currency, on which he pays “gains” of 2000 in local currency to the US.)
The US system is fundamentally unjust, and is not in any way a model to be copied -the US recognises this, cos they criticised Eritrea for doing it, although of course it’s “different” somehow when they do it… Anyway, if the entire world ran its citizenship and taxation rules like the US, my kids would each have to pay tax to 4 countries (2x jus sanguinis, 1x jus solis, 1x residency).
I note that Pakistan is not on the OECD white list. I look forward to your just and courageous calls for British passport holders resident in Pakistan to pay British income taxes, and, for the sake of fairness, for Pakistani passport holders living in the UK to pay Pakistani income taxes too.
This does not take money out of poor economies – largely because, as you will note, I have allowed for such situations – but it would out of tax havens
Arguing on what I have suggested, not what you would wish I said, would help
“with substantial potential tax being avoided by their residence abroad — probably in a tax haven.”
“probably” != “only”. In any case, OECD lists Guatemala as a “tax haven”. Guatemala is a poor country. Thus a UK citizen working in Guatemala paying tax to the UK (in return for no services rendered – whatever happened to the social contract?) is taking money out of Guatemala’s economy. QED. Plus, as pointed out above your list does not include African countries, which are universally poor. So it would take locally-earned money out of their economies too, whether they fit your ad-hoc definition of a tax haven or not.
And many millions of people would take umbrage at the idea that they are avoiding potential tax by not living somewhere. I have every right to live in e.g. France or Germany, and if I lived there, I would have a tax liability there. Am I avoiding potential tax there by not living there? Are my dual-national kids who live in a 3rd country avoiding potential tax in the countries of their citizenship, in neither of which they have ever lived?
And simply saying that you’ve accounted for that, or doesn’t apply to EU/EEA/EFTA is just adding epicycles.
Plus, it’s not so easy just to get another passport if you’re not born dual or otherwise eligable at birth – some countries have racial or religious requirements, or require extremely long periods of residency.
“Arguing on what I have suggested, not what you would wish I said, would help” I believe I complied fully with your request.
Have you noted that I exempted the vast majority fo the world by income from the charge?
If not, why not?
You really have not read this
“This does not take money out of poor economies — largely because, as you will note, I have allowed for such situations — but it would out of tax havens”
How can you possibly argue that it would not take money out of poor economies? You have said that the only exclusions to your policy would be EU and ‘white list’ countries. Are you now adding ‘poor economies’ to your exclusion list?
Would a country with no DTA with the UK would be excluded from your plans if it was a ‘poor’ country??
The more your scheme is explored the more it unravels and simply saying “I have answered that” when you clearly haven’t just won’t do.
The tax due would be over and above what was due locally
And you will note it only applies to those with UK income above the basic rate level
That is a massive exemption in developing countries
So shall we be realistic here?
And as before, all such points have already been answered
“Have you noted that I exempted the vast majority fo the world by income from the charge?”
Put specifically then, would someone earning £200,000 p.a. who was a UK passport holder working in a ‘poor’ country but one with no DTA with the UK and not on the ‘white list’ be excluded or included from your policy?
If included, how can you possibly argue that this wouldn’t take money out of that country that could otherwise benefit the local economy.
If excluded it just adds another layer of unworkable, bewildering bureaucracy.
Included
And no, that does not mean money is taken from the local economy
It would be paid to the one to which it was then owed
I don’t have a passport. Does this mean that I don’t have to pay any tax at all?
No
You are a UK resident
The ‘passport’ element of this merely extends the definition of residence
“The ‘passport’ element of this merely extends the definition of residence”
… to people who are in fact neither resident nor receive services. And will result in triple taxation of joint UK/US citizens resident in third countries on your naughty list. Quadruple for those who happen to have a parent from Eritrea also.
Anyway, if you’ve exempted “most of the world”, exactly to which countries would this apply? You have not specified. Please elaborate – I’m struggling to comprehend the full scope of the spirit of your proposal.
It applies to all states not on the ‘white list’
How clear do I need to be?
I think the risk of double taxation remote
An equitable relief clause could be included though: I would see no problem with that
“You also seem to suggest that such a law would raise tax revenues in the UK. I assume that if the UK implemented such a rule other countries would follow suit quite quickly. So what about the tax revenues lost in the UK because foreign passport holders in the UK would now have claims against their taxes from their own home countries?”
Precisely. We’d have hundreds of thousands of British citizens of overseas origin receiving tax demands from foreign governments, over and above their British income tax. And whereas “just surrender your foreign passport” might seem like a good idea, consider that many countries consider somebody a citizen (and liable for things like national service) regardless of whether or not they hold a passport.
So we can look forward to Pakistan, India, and Iran serving tax demands on British citizens who long ago surrendered their original passports – and requesting assistance from HMRC in bringing these “tax avoiders” to book! Not to mention the fact that these British citizens will be unable to return to their country of birth without being jailed for non-payment of taxes.
The liability to another government would only arise if in excess of that due to a country of source
You are again making problems that do not exist
And as a matter of fact I am not proposing this law for anyone but the UK
But if they did pass such laws then it would be right for the UK to assist them
You are again making problems that do not exist
“Again?” That was my first ever comment on this site.
But if they did pass such laws then it would be right for the UK to assist them
I’m glad you agree that your proposals would involve HMRC prosecuting British citizens on behalf of foreign countries which said British citizens have no connection with save for a place of birth.
I think you will find it is called mutual assistance
Just a funny tidbit… Only 2 countries in the world seem to have a “passport tax”. The USA, as we all know, and Eritrea!!!!
“It applies to all states not on the white list”.
I presume you refer to the OECD white list. So, to take my previous example, it applies to a whole bunch of poor countries, like tax-haven Guatemala. And most of Africa.
So my earlier point still stands. Taking money out of the economies of poor countries to give it to a rich country by defining its residents as simultaneously resident in the UK based on citizenship.
No
I make quite clear by what I mean by a white list
You have not bothered to read
Please don’t call again
I have re-read your post. You have not defined exactly which countries would/would not be on YOUR white list.
It would be informative for you to do so rather than criticise others for not being telepathic.
I have defined as adequately as need be
There is no more need for greater definition: things change and this is only a proposal on a blog
I think it is easy to work out who will lose from your proposal – most of them seem to have posted in this thread.
“And no, that does not mean money is taken from the local economy
It would be paid to the one to which it was then owed ”
Oh, come on Richard! Good grief.