Taxation, Eastwood style

In the film Unforgiven, Clint Eastwood tells the lawman who is about to die, “Deserve’s got nothin’ to do with it.” However, personal taxation is different.

Here, a degree of fairness is important if the law is to be respected and, by that criterion, Labour’s proposal to abolish the remittance basis for non-domiciliaries is difficult to fault.

Why, after all, should people be taxed differently simply because of their father’s domicile when they were born? How can it be right that executives in similar jobs should be taxed differently on their foreign earnings?

That’s a no-brainer then: pledge a fairer system; harvest the votes of those who cherish social justice; and reform the system into something that is more modern, cuter, trendier and altogether more cuddly. What could possibly go wrong?

Many years ago I was talking to a distinguished Dutch tax lawyer and complaining about the Netherlands’ system of tax clearances.

It seemed to me that the ability to agree things with the authorities gave Holland a huge commercial advantage and made it a far more attractive jurisdiction for various forms of financial operation than, say, the UK. I said that that was “not very fair”.

“Perhaps not,” he said, “but then we in the Netherlands would swap all the advantages of our system for the opportunity the UK has to attract foreign money and talent through the relief it gives to non-doms. No wonder London is so successful.”

Why, after all, should people be taxed differently simply because of their father’s domicile?

It is impossible to spend one’s career in the City of London without being overawed by the inventiveness and hard work that contribute to its success as a financial centre.

Still, it would be foolish to deny that other factors have helped and the fact that the UK works as a partial tax haven for foreign executives who work here has ensured that businesses, which would otherwise have been set up in other European capitals, have come here instead.

The trouble is that it is hard to know how much of the City’s success is attributable to this and how much to that impressive intelligence, integrity, inventiveness and hard work.

I suppose that both must play their part, but could it be that both are an essential ingredient of the type of dominance that the City now enjoys? If they are – and I don’t suppose that the politicians proposing the change have a clue whether they are or are not – then, well, “oops”.

Of course, governments are entitled to change the rules in the interests of fairness, even if that means taking risks with the public finances, but it is only just that their proposals be measured by the standards of their own rhetoric.

We are constantly told how this levy or that will mean more money for nurses. If they call this one wrong there will be fewer nurses, fewer hospitals and fewer quite a number of other things as well.

It would be a good thing, therefore, if those proposing the change thought though the consequences and also perhaps considered whether any change to the rules for non-domiciliaries should be accompanied by a drop in the top level of income tax to a rate that would not be off-putting to those who can choose where they live or set up business.

Yes, a good thing but very unlikely. Careful judgment goes out of the window at election time so Mr Miliband must have a different basis for his decision.

Perhaps he just asked himself, “Do I feel lucky today?” and, having answered in the affirmative, decided to risk the hospitals and go ahead.