20 February 2008

Telegraph: Ireland ready to capitalise on UK's non-dom tax plan

The Irish government has made it clear that it will retain its existing tax breaks for nondomiciles in an attempt to woo foreign workers resident in Britain who are facing a clampdown from the UK Treasury.

The Irish Finance Ministry confirmed on Friday that it had no plans to change its current non-dom rules even as the Minister launched a commission "to review the structure, efficiency and appropriateness of the Irish taxation system". Asked whether it was making overtures to British non-doms, the Irish department of enterprise, trade and employment said: "It is policy to continuously market Ireland as an attractive base for investment in industry."

The signal comes after a week of furore over the UK Treasury's plan to levy a £30,000 tax on non-doms unless they pay tax on overseas assets and income. One senior source within the Irish business community said: "This is a very great opportunity for Ireland, perhaps the greatest since the development of the International Financial Services sector."

Over the last 20 years, the IFS has grown from nothing into an industry that services €1.8 trillion of assets. It was created thanks to the Irish government offering tax breaks to overseas financial services as long as they opened an office in Dublin's docklands.

Last week the City of London, business leaders and accountants warned of the dangers to London's status as a financial capital if the new measures came into force. So great was the opposition that Alistair Darling retracted some measures such as requiring non-doms to disclose assets in offshore trusts, blaming the "clarification" on a misunderstanding by officials about the Government's intentions. However, his move failed to stop further protests from non-doms concerned that the proposals were being "cobbled together" without proper consultation.

Professor Gilles McKenna, who moved with his wife from the US three years ago to develop Oxford University's radiation oncology and biology unit, has warned that the plans could also jeopardise the UK's ability to attract top academics. He said: "Had we known the Government was going to do this, we would not have come." The Institute of Directors has called for a delay in implementation to assess the impact on the UK economy.

The Chancellor, who has so far ignored these calls, hopes to raise £800m from the measures. Many accountants warn he could lose billions of pounds as non-doms relocate. Already re-location agents from Ireland have contacted some of their clients. Chris Sanger, head of tax policy at accountants Ernst & Young, said: "Ireland is the closest and simplest jurisdiction for UK non-doms to move to, especially if those affected are thinking about doing something in the short-term."

Other favoured destinations include Switzerland and Singapore. Concerns have also been expressed that the withdrawal of personal allowances will mean that the changes hit low-paid foreign workers the hardest. Mr Sanger said: "The personal allowance was originally designed as an administrative tool rather than a tax incentive. "Those who come hereto study and don't earn much will now have to file tax returns immediately.

"A lot of people feel that the changes can't really be what they seem and that certainty must come soon. But that doesn't look like it's happening at the moment." The consultation on the proposals closes at the end of this month and the changes are expected in the Budget on March 12.

© Daily Telegraph