TAX NEWS - 2010

UK Passport Tax: Ritchie rewrites tax law for UK nationals

Ritchie rides a coach and horses through our existing tax law for UK nationals with his revived proposals for a 'passport tax'.

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.

There are so many things wrong with this, I don't know where to begin.

1.You can't "break all ties with the UK - including any right to return". One of the criteria that enables an individual to obtain a UK passport is having been born here, or having a UK-born parent. With that, you can always return. Unless Ritchie is proposing tearing up existing citizenship legislation?

2.He proposes excluding those who live in Europe (presumably in part because it would be totally illegal under European law). So the principle of all UK citizens having to file a tax return would only apply to some, not all.

3.He proposes excluding those who live in territories which have a full double tax treaty with the UK. This is bizarre, as that would mean that some people (those living in a DTT country) would pay local tax on their foreign-source income and get benefit for it in the UK, whereas others would pay local tax on their foreign-source income and get no credit for it at all. They would be double-taxed, which as a general principle is unfair.

4.Ritchie thinks this could bring in billions to the UK at "no cost to the honest people of the UK". I'd politely suggest that this is an optimistic boast. Having scoped out those countries with which we have a DTT, we're left with the real problem cases - tax havens and the like. While there are ways and means to get information out of those countries sufficient to launch an investigation, following up on leads and launching lawsuits against errant taxpayers is unlikely to be even a low cost option.

This isn't to condone tax avoidance. It's to say that redefining our existing tax laws in arbitrary and contradictory ways and failing to allow for sensible compliance isn't the way to go about combating it.