Labour to review ‘non domicile’ tax law if elected

The Labour Party on Wednesday pledged to scrap tax rules that allow wealthy individuals to legally reduce the amount of tax they pay on money earned overseas if the party wins a national election on May 7.

The change would affect about 116,000 people who live in Britain but who currently are not required to pay tax on income  earned abroad, unless they bring the money into the country, under the so-called non-domicile or “non-dom” tax rules.

The plan highlights the centre-left party’s willingness to pitch itself against the wealthy to win over voters and edge ahead of Prime Minister David Cameron’s Conservatives in what polls show is a neck-and-neck election race.

Public anger at the perceived freedom of wealthy individuals to avoid paying British tax has made the issue of non-doms politically potent after a long squeeze on voters’ living standards.

“Why should there be one rule for some and another for everybody else? It is not fair, it is not just, it holds Britain back. We will stop it,” Labour leader Ed Miliband said in a campaign speech.

“We will replace it with a clear principle: Anyone permanently resident in the UK will pay tax in the same way.”

The non-dom system has also been accused of being easily manipulated to allow British nationals to shift earnings offshore and avoid paying tax. But successive governments have resisted its abolition over fears wealthy foreign business leaders could abandon Britain altogether.

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