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John Peel, when told that the benefit of compact disc technology over the plastic record was that there was no background noise, is alleged to have replied, 'Background noise? The world's full of background noise!'
Not only that of course, but what do you actually get for your money with a CD? Don't try to tell me that that little piece of silver plastic in a plastic box is worth £14.99 of my hard-earned money. Where's my see-through vinyl disc, where's my gatefold or pop-up album sleeve, where's that carefully art-worked album cover so useful for displaying or using for various other purposes? What use is that little plastic box that's almost always cracked or scratched when you buy it anyway? But what has that little rant got to do with the rules on non-domiciles?
Well, having been involved in reviewing the Budgets over the past few years, it did come into my mind that I was seeing the same old phrases coming around with monotonous regularity. Now, many a successful career in rock music has been built on a three chord riff, but there's got to be a bit more imagination than the C, F and G chords repeated ad infinitum.
I understand that Gordon Brown first suggested the abolition of the tax rules relating to non-domiciles in speeches before the 1997 election. After a few years of apparent inaction — perhaps the equivalent of a band spending some time in the studio 'getting its head together', the record was released to an eager public in 2002. Although Kevin Slevin suggests above that 'there is little point in running through the various government discussion papers', I thought it might be illustrative to simply look at the Budget pronouncements.
First verse
Budget Report 2002. Paragraph 5.83 — Residence and domicile. 'The Government is reviewing the residence and domicile rules as they affect the tax liabilities of individuals. The Government believes that modernisation of these rules needs to be based on clear principles: the rules should be fair, clear, easy to operate, and support the competitiveness of the British economy. As this is a complex area, all those affected should have the opportunity to contribute to the discussion. The Government will report on this issue in time for the Pre-Budget Report.'
Second verse
Pre-Budget Report 2002. Paragraph 5.81/5.82 — Residence and domicile. 'Budget 2002 announced a review of the residence and domicile rules as they affect the tax liabilities of individuals … The Government welcomes the comments received in response to the Budget announcement, and invites further contributions to inform the ongoing work in this area … Building on this work, the Treasury and the Inland Revenue will assess how the current rules work in practice, and will publish a background paper to aid discussion of how the rules compare with the Government's principles.'
Third verse
Budget 2003. Paragraph 5.93. Residence and domicile. 'The 2002 Pre-Budget Report gave further details of the Government's review of the residence and domicile rules. The Government is today publishing a background paper, Reviewing the residence and domicile rules as they affect the taxation of individuals, which takes forward continuing work in this area. The paper describes the current rules and their historical perspective, analyses international experience, and develops the principles that the Government believes should underpin any modernisation of the system. The paper will provide a framework for further analysis and discussion and ensure that any specific options for reform of the current rules are based on the widest possible understanding of their effect.'
The middle eight
Background paper 2003. This document, Reviewing the residence and domicile rules as they affect the taxation of individuals: a background paper, can be found on the internet at http://snipurl.com/domrev. James Kessler (in Taxation of Foreign Domiciliaries) commented that 'it may be unfair to criticise the (unnamed) authors of this facile document. Their instructions may have been to be totally uncontroversial; by saying nothing there is nothing in the document to which anyone of any political view could possibly object. Whatever future developments occur, they will not occur as the result of this background paper.'
Fourth verse
Pre-Budget Report 2003. Paragraph 5.108/9 — Residence and domicile. 'At Budget 2003, the Government published a discussion paper on reform of the residence and domicile rules … The Government recognises that this is a complex and far-reaching issue and is determined to proceed on the basis of evidence and in keeping with its key principles. The Government is continuing to examine responses to the background paper and welcomes further contributions. Once this process is complete, it will move forward with a formal consultation paper on possible approaches to reform.'
Fifth verse
Budget Report 2004. Paragraph 5.103 — Residence and domicile. 'The Government is continuing to review the residence and domicile rules as they affect the taxation of individuals, and is considering various aspects of this issue in the light of the responses to the paper published at Budget 2003. The Government remains determined to proceed on the basis of evidence and in keeping with its key principles. It would welcome further contributions to the debate, which will then be taken forward by the publication of a consultation paper setting out possible approaches to reform.'
Sixth verse
Pre-Budget Report 2004. Paragraph 5.101 — Residence and domicile. 'The Government is continuing to review the residence and domicile rules as they affect the taxation of individuals, and is considering various aspects of this issue in respect of the responses to the background paper published at Budget 2003.The Government remains determined to proceed on the basis of evidence and in keeping with its principles. It would welcome further contributions to the debate, which will then be taken forward by the publication of a consultation paper setting out possible approaches to reform.'
Seventh verse
Budget Report 2005. Paragraph 5.116 — Residence and domicile. 'The Government is continuing to review the residence and domicile rules as they affect the taxation of individuals and will proceed on the basis of evidence and in keeping with its principles. It would welcome further contributions to the debate, which will then be taken forward by the publication of a consultation paper setting out possible approaches to reform.'
James Kessler was singularly unimpressed. 'This statement has now been made four times over the last two years. The first two times it was credible, though with the benefit of hindsight it is difficult to believe that it was true. In any case, one must be credulous to believe it now …'
However, he did give the Government the benefit of the doubt. 'Another possibility is that the Government does propose to change the law, but wished to postpone making a politically contentious announcement until after the 2005 election: if that is right some developments can be expected in the 2006 Budget'.
But with regards to the Budget 2005 statement, James asked 'How many more times can this statement be repeated before even the Government is embarrassed to do so again?'
The answer turned out to be 'twice'.
Eighth verse
Pre-Budget Report 2005. Paragraph 5.103 — Residence and domicile. 'The Government is continuing to review the residence and domicile rules as they affect the taxation of individuals, and in taking the review forward will proceed on the basis of evidence and in keeping with its principles.'
Ninth verse
Budget 2006. Paragraph 5.104 — Residence and domicile. 'The Government is continuing to review the residence and domicile rules as they affect the taxation of individuals and in taking the review forward will proceed on the basis of evidence and in keeping with its principles.'
Fade out?
Following this report, even the Government seemed to concede that they were sounding somewhat like a vinyl record with the needle stuck in the groove and there was no mention of residence and domicile in the Pre-Budget Report 2006.
However, just when one might have thought that the record had been consigned to the local charity shop or perhaps melted into a stylish flowerpot, someone in the Exchequer obviously decided to get out his anti-static record cloth and give it a good rub over, before plonking it back down onto the turntable, taping a coin to the top of the cartridge and placing the needle carefully down at the beginning of side one …
Slight return
One musical 'trick' that can be quite effective is where the song ends, only for there to be another section following a few seconds of silence (or background noise if you are listening to the original vinyl version), hence 'Budget 2007. Paragraph 5.120 — Residence and domicile. “The review of the residence and domicile rules as they affect the taxation of individuals is ongoing.”'
End of side one
So music lovers, there you have it. You will either conclude that the record was stuck or you might be admiring the fugue like structure of the regular announcements. Either way, this is not to say that there has been no progress at all in this regard. An International Monetary Fund working paper (http://snipurl.com/IMFwp) has recently identified the UK as an offshore financial centre (OFC) in the company of the Bahamas, Bahrain, Bermuda, the Cayman Islands, Cyprus, Hong Kong, Guernsey, Ireland, Isle of Man, Jersey, Luxembourg, Malta, Netherlands Antilles, Singapore and Switzerland; and Ed Balls MP recently reported that there are now 112,000 individuals who indicated that they were non-domiciled on their self-assessment tax returns for the year ended 5 April 2005 — a 74% increase over the figure for 2002.
The extent to which this increase has been encouraged by the Department of Trade and Industry's promotion of the UK as a tax haven (as referred to by Kevin) through its UK Trade & Investment agency's 'entrepreneurs' website (http://snipurl.com/haven) remains to be seen.
However, no doubt the promise of access to finance and grants, 'first class research and development' (and presumably to tax relief for such work carried out through a company owned by a non-dom) as well as 'first class education and housing', yet with the benefit of 'an opportunity to minimise your tax liability as far as possible' could well prove attractive.
After ten years of no apparent progress in this regard, perhaps a government paper could at least explain the difficulties that have prevented action being taken.
