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Footballers and foreigners are the latest targets in Darling’s tax shake-up

20 November 2007
Chancellor Alistair Darling’s new controversial tax rules aimed at closing the loopholes offered to the global super-rich by Britain have claimed their latest victims.

Super-rich foreign footballers and ‘non-domiciled’ residents are the latest groups to come under fire from the Treasury after it emerged that they pay tax at a rate of less than 10% on multi-million-pound earnings. Now Gordon Brown’s Government is clamping down on those exploiting tax break loopholes in the hope of creaming off extra cash from those who, in the Government’s opinion, can simply afford to pay the extra.

Britain has been a haven for foreign nationals who have been able to work and live in the UK while paying a lower rate of tax than the average working Brit. Now the latest figures from the Treasury indicate that there are currently around 114,000 people claiming non-domicile status in the UK avoiding an estimated £1 billion in tax. In addition, one in six of the UK’s highest earners are non-native.

However, the pending tax shake-up, which will come into effect on April 52008, would see any foreign national who has been resident in the UK for seven or more years pay an additional flat rate charge of £30,000 a year in order to avoid paying capital gains and tax on their overseas income.

The move is being heavily criticised by accountants and solicitors who say that foreigners and their employers who have assets of less than £1.5 million, the so-called ‘middling rich’ will be forced to leave the UK as the new tax treatment will simply be too expensive for them to remain.

Americans, who already pay tax on worldwide income to the US Government could be hit particularly hard and risk paying double taxation unless the US and UK create some sort of mutual amendment to their tax systems.

International footballers such as the Manchester United stars Cristiano Ronaldo from Portugal and Canadian, Owen Hargreaves, and even David Beckham are non-domicile for tax purposes and will also be subject to the £30,000 flat fee, however, Beckham will be paying tax on his US earnings.

Under the law, non-domiciled players must be born abroad or have parents born abroad and with almost half the players in the Premiership hailing from overseas, the Treasury is losing out on a large proportion of the footballers’ generous income.

The news follows reports from the World Bank that more than a third of countries have improved their business tax systems in the past three years. Britain took the 12th spot followed closely by Denmark. However, the report went on to say that even the best-rated countries could do more to reduce business taxes, simplify the tax structure and cut the compliance burden. Rita Ramalho, tax specialist at the World Bank-IFC, said the study should definitely be a wake-up call for all nations but in particular Poland, Hungary and Romania who are languishing at the bottom of the table.

“Despite previous reluctance to reduce tax burdens for fear of cutting government revenues, some governments that have implemented tax reform have reaped the benefit of higher investment and economic growth,” she said.

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