Britain is once again a magnet for big businesses and the super rich because of its favourable tax scheme.
Chancellor of the Exchequer George Osborne’s attempt to lower the corporation tax rate to 20 per cent has encouraged offshore enterprises to return to Britain — including Sir Martin Sorrell’s leading advertising group WPP.
Labour politicians claim that the top income tax rate reduction this month — from 50 to 45 per cent — was a tax cut for millionaires. But research by the Treasury suggests that the higher tax rate encouraged companies to find ways of avoiding UK taxes.
We need only look at France to understand the impact of high personal taxation. The proposed 75 per cent tax on annual salaries over ¤1 million has led to a flood of financiers turning London’s South Kensington into little Paris.
One of Margaret Thatcher’s greatest legacies was her recognition that lower tax rates yield greater returns because they discourage avoidance and stimulate enterprise. The 2008 — 2009 recession put pressure on this principle as budget deficits soared and government used higher taxes to redress the balance.
But even in France, where President Hollande faces pressure in the polls, the wisdom behind such moves is being questioned.
The American bankers, Russian oligarchs and Middle Eastern potentates who now call Kensington and Chelsea their home, reflect the benefit of a UK tax regime that involves a flat-rate fee. The grotesque prices for apartments at One Hyde Park, where properties have changed hands for £140 million, also indicate the outside wealth pouring into Britain.
Even the Israelis are arriving, with Idan Ofer, described as Israel’s richest man, reportedly moving to Britain.
His Romanian-born father, the late Sammy Ofer, had strong connections to Britain having served in the Royal Navy during the Second World War.
But as co-heir to a shipping fortune and director of Israel Corporation, the Jewish state’s largest holding company, Mr Ofer’s decision to relocate to the UK has led to resistance from Israelis. The current controversy over the proposal to sell Ofer-controlled Israel Chemicals to Potash Corporation of Saskatchewan has put the family at odds with the Benjamin Netanyahu-led government coalition.
Amid the imbroglio Britain’s tax arrangements for non-domiciles remain extraordinarily attractive.
Alex Brummer is City Editor of the 'Daily Mail'