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Comment by jdietrich | Hacker News Reader

Until April of this year, it was possible for a foreign national to be resident but not domiciled in the UK. Any income they earned in the UK would be subject to UK tax, but income earned abroad would not be. These non-domiciled foreign nationals could "live" in Dubai (or any other country) for tax purposes, but actually live in the UK in every practical sense.

The removal of this non-domiciled status is clearly far more significant than a normal tax increase. The UK was a uniquely attractive destination for the super-rich, because they could enjoy all the amenities of living in London with no real concerns about the tax implications. It is plausible that many of those people will decide to pay UK tax rather than move abroad, but we are talking about an exceptionally highly-mobile group who have already made the decision to move country, many primarily or solely for tax reasons.

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Isn't the defining characteristic of the wealthiest demographic their ability to pay for things that they want (like living in London) without any concern over the cost of doing it?

No, just the opposite. In general, the things wealthy people buy (luxuries) experience much larger swings in demand due to price changes like added taxes (in economic terms, "the elasticity of demand"). It's because they are only wants and not needs. They are also usually easily swapped. Instead of buying your wife those diamond earrings, you could get her a painting or a trip to Spain. And rich people are often very money savvy.

It's the necessities that people will continue to buy (or at least replace with close substitutes), regardless of what happens to the price.

Obviously, in this case it worked out much differently, but no, in general you can't say the wealthy people don't respond to price changes due to their wealth.

> without any concern over the cost of doing it?

indeed thats why to have accountants and lawyers, the issue here is that non-dom meant that you could avoid paying tax on stuff you earnt outside of the UK. for example if you have a lot of income being generated in the USA, then being a non-dom meant that you could avoid paying tax here in the UK at the same time.

For US citizens its a bit harder, as you're liable for tax on all income, regardless of source. I'm not sure how they get round that, debt financing or something similar I imagine

What’s the problem with that? Why should the UK or any country have a claim to money people are making elsewhere?

Morally speaking, there are two principles at play.

The first is paying your fair share of taxes for enabling the system of rule of law, financial protection, courts, stability provided by national defense, etc. that help you earn that money in the first place. This argues for paying taxes in the country where the money is earned.

The second is the principle of progressive taxation that funds the entire social system where you live -- roads, schools, parks, police, health care, retirement. The richer you are, the higher the rate you can and should give back. Thus it doesn't matter whether you make your money at home or abroad -- it counts toward the taxes you're morally obligated to pay for where you reside and/or are a citizen of.

Because these conflict, the US allows for Americans to let taxes paid abroad count against their US taxes, so they're not double-taxed. Which is one form of a reasonable compromise. There are many other forms you could imagine.

I lived in country A - normal apartment, I went to a really shitty school, got bullied there, didn't finish university. I had to pay out of pocket for healthcare as public option sucks and didn't want to help me. I made my money selling my software to people abroad. How is it in any way fair that I pay all my taxes in country A instead of to all the countries that really made it possible for me to earn money?

>>Thus it doesn't matter whether you make your money at home or abroad -- it counts toward the taxes you're morally obligated to pay for where you reside and/or are a citizen of.

What about all other countries that were stable and nice enough and allowed me to make money? Why should I be "morally obliged" to pay taxes in a country I didn't choose, that was shitty to me and didn't help me much if at all? I used very little resources there (now I finally moved). It would feel even more unfair if they followed me abroad and required even more taxes.

>>There are many other forms you could imagine.

Yeah, like paying proportionally (or progressively) for resources you use in a country or for business you do in that country. It seems really unfair that my country gets all my taxes for providing very little to me while all other countries that gave me business opportunities got close to nothing (some VAT in EU countries but that's it).

> It seems really unfair that my country gets all my taxes for providing very little to me

Do you not get police and fire protection? Health care? Rule of law? Urban and rural infrastructure? National defense? Some level of education? Courts that enforce property protection? And so forth?

We often don't see all the benefits our government provides because we take it for granted. But if you ever go visit somewhere where you need to hire bodyguards so that you're not kidnapped while driving, security forces around your compound to prevent it from being looted, and pay constant protection money to the local crime boss so he specifically doesn't kill you and take your stuff... you might realize your taxes pay for a whole lot more than you think.

Obviously every country can do more. But in a democracy that's why we try to vote in candidates who will improve things. And you can always try to move to a better country, if they'll let you. But that's up to them.

(If you live in a dictatorship, then obviously you have more reason to be able to complain since you don't have any legal ability to work for change from within the system.)

>>Do you not get police and fire protection? Health care? Rule of law? Urban and rural infrastructure? National defense? Some level of education? Courts that enforce property protection? And so forth?

I got some of that although I got robbed 3 times in my life and police has done nothing. The point is I got those services at the level of any other citizen. What I really benefited from are other countries than mine which I paid 0 taxes to. It would be fair if I paid proportionally to those at the price they see fit for me doing business there. As it is my (shitty) country got all the taxes how does it make sense?

>>We often don't see all the benefits our government provides because we take it for granted.

My point is that the country gets all my taxes and I pay disproportionally even though it's real other countries (the one I sell to) that made it possible for me to do well. When I spend a few months per year in Spain I don't pay taxes there eithre. I think it's unfair. It would be better if I paid proportionally to my resources usage/time there.

> (now I finally moved)

There's your answer. I was in exactly the same position (felt what the country had to offer me was piss-poor, so I left).

Whilst I lived in that country however, _I paid taxes_. A country has costs, just like a household. There's the obvious things like police and other civil servants, but there are also countless invisible costs that go to holding a country together. To say "well I didn't choose to be here anyway" is childish.

Because physical presence incurs costs to taxpayer funded infrastructure? Why should I be able to dodge taxes by working remotely abroad? Are you saying independently wealthy people should be able to roam around and freeload without paying tax to their resident nation?

In the US many people falsely believe illegal immigrants do exactly that, and that lie has contributed to a lot of outrage, so obviously people perceive the system you're proposing as unjust.

>>Because physical presence incurs costs to taxpayer funded infrastructure? Why should I be able to dodge taxes by working remotely abroad? Are you saying independently wealthy people should be able to roam around and freeload without paying tax to their resident nation?

Yeah so tax their presence: land, resources usage, consumption. If you insist on taxing their whole world wide revenue don't be surprised when someone living across multiple countries choose one that isn't yours and then you get 0 taxes.

I live across 4-5 countries spending a few months here and there. Fair system would tax me for my presence/consumption/resource usage accordingly. That tax might be progressive (bigger house taxed at higher rate, luxury consumption taxes at higher rate etc.) but shouldn't belong to one country if you care about fairness.

In the US most things are funded by income and payroll tax, the taxes you mention add up to about 30% of our budget so are not enough on their own. In addition I am unconvinced that it is even possible for consumption taxes to be progressive enough to make up for their inherent regressivity at high income levels. I do think it would be reasonable for the global tax to be prorated by time spent in the US though, which would solve your objection.

But illegal immigrants indeed does not pay taxes in the place of residence, why "falsely"?

> Undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022. Most of that amount, $59.4 billion, was paid to the federal government while the remaining $37.3 billion was paid to state and local governments.

https://itep.org/undocumented-immigrants-taxes-2024/

I get property and sales taxes, but how are they paying income tax? Shouldn’t they have a SSN for that?

They often use fake or stolen SSNs. That also means they're paying Social Security and Medicare taxes but will never collect those benefits.

Tax Identification Numbers are a separate ID number for people without SSNs. Loads of legal migrants don't have SSNs but still pay taxes as well.

But still, wouldn't you need some valid status to get one of those? I know from friends that had to get it for their child that they had to prove status if I remember correctly.

You do not need to prove any kind of status other than you are a foreigner and this is your identity. A foreign voter registration card, a foreign national ID card, or a USCIS-issued photo ID card can all be valid. It doesn't inherently mean you have the right to stay or work in the US.

That's a part of why there was a lot of hubub about ICE searching the IRS's databases for potential targets. There are a lot of people who are probably working in the US paying income taxes without authorization to stay or work in the US. The IRS generally doesn't care about your immigration status, it just cares about collecting taxes.

You can get a tax identification number without an SSN.

An illegal / undocumented worker working a standard W-2 paycheck job is going to have taxes withheld and sent in by the employer, even if they never file their own tax return.

It is not like that, usually immigrants live in grey arey keeping all contacts with govt to the minimum, the whole idea of hiring illegals is to avoid taxes. I know that from personal experience of being illegal immigrant in US of very close person.

Some might be using faked documents to get a 'legit' job, in which case the job will withhold and pay taxes like any other legal employee. That's what the report I linked to is showing.

Did you read the link above? The average immigrant pays $9000 in tax per year.

Are you asking why any country is able to impose a tax on its residents? Morally, because they owe an obligation to the society they live in. Practically, because the state has a local monopoly on violence and may jail them unless they pay.

Why should that obligation be proportional (or progressively proportional) to the wealth you have and not to the resources you use (or wealth you have in that country). Why someone who made millions in Poland (and paid taxed there) should pay 20x for living the same life in say Spain as a typical resident there?

It's so easy to say "moral" but I struggle to see the moral principle at play. I understand paying proportionally to resources/wealth in that country. I understand paying progressively for those or income in that country but why pay in proportion to what you have already build in another place?

Live in that other place, then, mate.

As it is I live for a few months per year in Spain for free. One of the reasons I am advocating for sane taxation instead of knee-jerk one (like wealth tax on world wide assets). I would really like to pay my fair share there but as it's nothing or a leg I choose nothing.

> Why should that obligation be proportional (or progressively proportional) to the wealth you have and not to the resources you use

It is proportional to the resources you use in every case where that is possible. It is nonsensical to say "Well, you used only 2% of police time this year, so that's how much police-tax you'll be paying", not least because it is impossible to put a "usage" on the benefit of having police in the first place. Where it is possible, like how much land you own, you are taxed proportionately.

>Why should that obligation be proportional (or progressively proportional) to the wealth you have and not to the resources you use (or wealth you have in that country).

This is analogous to asking why should software be priced on value delivered, vs priced on costs incurred in producing. Value pricing is much more common.

The value you derive from living in the country of your residence is higher that your poorer neighbors; hence you are charged more.

I think its an issue of fairness.

I, as a rich techbro, but not an Uber rich techbro, have to pay ~46% of my income in tax. (even though the majority comes from the US in USD) Don't get me wrong, I earn a fucking kings ransom, and I don't mind paying that amount of tax.

but. If I was earning maybe 4x that amount, I could probably avoid a whole bunch of tax. It doesn't seem correct that the richer you get, the more optional tax is.

The thing is it’s not even 4x that amount, it’s more like 20x that amount.

Having listened to my more senior colleagues, it wasn't that much more. If you own your own company, or have the ability to change your contract, its probably a lot less.

You are morally liable to pay taxes where you use services and rely on infrastructure.

I imagine the exodus was where the corporation is incorporated. And on paper someone with billions of dollars now has a mere 500k. Or whatever loophole their lawyers decided to figure out.

That's exactly what I don't get. If you're a billionaire and your whole lifestyle goes topsy-turvy because of some new legislation, what's the point of being a billionaire?

E.g. Lakshmi Mittal, one of the richest persons in the UK, was rumored to consider moving to the UAE because of the non-dom rule changes.[1] To me it's ridiculous that a person this rich feels such weak control over where they should live. And it's not like moving from the UK to the UAE is like moving from Switzerland to Austria. It's a humongous upset by most measures.

[1] https://www.cityam.com/steel-billionaire-lakshmi-mittal-to-d...

I don't think these people would be superrich if they wouldn't be optimizing their taxes, at least at some level. I would guess taxes are the typically the biggest single expense the really rich people pay.

I would have thought that being superrich would free you from worrying about 'optimizing your taxes'.

I would think so, but perhaps for the people who are self-defined by the magnitude of their wealth they become more and more obsessed by it as their expenditures on "real" things dwindles in comparison.

Yes, but if they have to pay a fair amount of tax they will only be able to afford a 40 metre yacht, rather than the 50 metre yachts that all their frenemies have and that just won't do.

There may have been a gain to attracting super-rich people to live in the UK historically (this is an OLD rule) however people no longer necessarily invest where they live so the benefit is far more limited, and is offset by effects such as making property in London a lot more expensive for everyone else.

In any case the super-rich are only taxed on income they take out of their businesses. That also limits the benefits of both attracting them, and of exempting them.

I do not see any evidence that there was a net benefit from this exemption.

> however people no longer necessarily invest where they live

This is a problem. The UK is experiencing what the US is experiencing so I hope you don't mind.

I'm all invested in the US. My citizenship, my family ties, my finances, and my language. Immigrating to a five-eyes nation would be far easier for me (racism aside).

There's no going back for me and my family, unless I want to immigrate out and start from the very bottom with absolutely nothing.

Because I'm a naturalized US citizen and I'm not white, I also harbor no illusions: There's every reason to believe that if this administration and its extremists continue down its trajectory, I and my family will eventually be subject to the worst.

I'm also not wealthy: So it's in my best interest to be a moderating voice, fight for the values that define my home, be seen giving back/paying it forward, and push for the best outcome for my home.

I'm not sure how to quantify the value add of this, and the wealthy transnationals who distinctly take without being a net positive--because they can so easily relocate--are a large part of the problem.

I am not sure we are talking about the same thing.

> The UK is experiencing what the US is experiencing so I hope you don't mind.

Depends in what way? Economically, in some ways. Socially and politically not.

> I'm all invested in the US. My citizenship, my family ties, my finances, and my language

I assume you are saying that to agree with me, in that the super-rich are never invested in one country the same way.

However, I meant invested literally, not metaphorically. Where you invest your money.

> I'm not sure how to quantify the value add of this, and the wealthy transnationals who distinctly take without being a net positive--because they can so easily relocate

Wealthy individuals can relocate. Businesses can relocate some things, but their actual operations are tied to physical assets and to where their employees live.

> Depends in what way? Economically, in some ways. Socially and politically not. The economics drive much of the social and political upheaval. The US is essentially performing its own flavor of brexit, though clearly there are a lot of differences.

> I assume you are saying that to agree with me, in that the super-rich are never invested in one country the same way. Yes. In the US and 100 years ago, FDR was called a traitor to his kind. I believe this disconnect remains true today.

> I assume you are saying that to agree with me, in that the super-rich are never invested in one country the same way. Mostly to have a conversation and grumble. I used to work for a UK firm many years ago and so I still have a fondness and soft-spot for (presumably) your country.

> However, I meant invested literally, not metaphorically. Where you invest your money.

Okay, that's certainly easier to measure then. If I recall in the greater London area, the most obvious problem stems from the wealthy parking their wealth in real estate, driving up the cost and lowering the supply for residents? Likewise with other services and products that have started to target only these wealth, making said services out of reach of everyone else.

Not to mention it concentrates the wealth and economy into one or two saturated areas.

Is that a correct summary of the issue at hand?

> The US is essentially performing its own flavor of brexit, though clearly there are a lot of differences.

In so far as its people being dissatisfied with the current state of things, politics dominated big parties that do not want to change things, and the influence of big business lobbies.

I think the problem with drawing a parallel with Brexit is that the EU also has these problems.

> Mostly to have a conversation and grumble.

I can sympathise with that. There is much to grumble about :(

> I used to work for a UK firm many years ago and so I still have a fondness and soft-spot for (presumably) your country.

Nice to know. i am British and Sri Lankan in terms of citizenship, mostly British culturally. I do not say "origin" because that is a bit more complicated.

> Okay, that's certainly easier to measure then. If I recall in the greater London area, the most obvious problem stems from the wealthy parking their wealth in real estate, driving up the cost and lowering the supply for residents?

Yes, definitely, and pretty much nationally.

> Not to mention it concentrates the wealth and economy into one or two saturated areas.

I would say a small group of people rather than areas.

Those people are already not paying tax in the UK though. The former PM’s wife has saved more in tax because of her status than everyone who works in my company combined will pay in income tax in their entire lives.

Indeed. The millionaires that are whining about paying their fair share of tax can ** off and not pay their taxes somewhere else. Good riddance.

Exactly this.

All this talk of "oh but all the rich people will leave and investment will dry up" is really cover for "but my friends don't want to pay tax". We lose nothing (good) by them leaving, if indeed they would anyway.

But whatever happens the uk will not lose tax income from these people. Yes, they will not buy expensive property. Yes they will not buy designer goods... but if they leave will the impact on the average citizen be at all significant?

Exactly. These people did not come to create new companies, employ people, come up with new products. These people came to London to party, not to contribute. They will take their party with them, but not their contributions - because there are none.

And have less super wealthy people buying properties that they mostly don't live in will lower property costs for everyone else. The only people who will lose is the ecosystem of lawyers, accountants, estate agents and assorted remoras that service the super rich.

Weren't there other restrictions as well? i.e could only stay 90 days at a time etc.

To expand on my previous answer, the rules about non-dom were - https://www.bbc.com/news/business-32216346

"If you are a non-dom ... and you choose not to pay tax in the UK on your overseas earnings, you must pay:

    £30,000 if you've been here for at least seven of the previous nine tax years

    £60,000 for at least 12 of the previous 14 tax years"

Which means that someone like the wife of previous Prime Minister Rishi Sunak could live in the UK, more or less indefinitely, and pay pretty much no income tax for seven years, then a very middle-class-salaried amount of tax where her earnings could actually be in the many millions. And as non-doms are tax resident in the UK, often they are also not taxed in the country where their money is earned.

It's a great big tax dodge and the rest of the UK population was pretty sick of it.

It is/was several years for “non-Dom” status people. That’s one of the reasons it was seen as such a scam.

You’re living there like everyone else yet using this niche status to avoid paying tax.

> The removal of this non-domiciled status is clearly far more significant than a normal tax increase. The UK was a uniquely attractive destination for the super-rich, because they could enjoy all the amenities of living in London with no real concerns about the tax implications. It is plausible that many of those people will decide to pay UK tax rather than move abroad, but we are talking about an exceptionally highly-mobile group who have already made the decision to move country, many primarily or solely for tax reasons.

Boo hoo, let them move to some remote tax haven then, and live there next to their money and incorporation documents.

If that would have been the actual response, it wouldn't have made sense to proceed with the reform. The goal of treasury should be to maximise social welfare, not lose tax money just to dunk on the ultrarich.

But a lot of them are paying little or no tax anyway, due to trusts, shell companies and other financial engineering.

They still had to pay at least the basis charge, which was 30 or 60k per head depending on how long they were here for. That alone should have more than covered the cost of providing civic services to them.

If they come and live in 10M house it's 300k/year right there if you tax properties/land (you can use progressive rate so it's higher on most valuable properties). Add consumption taxes and every rich Chinese/Arab kid is sponsoring welfare for few dozens people per year.

The yearly council tax of a £10M house in central London is the same as a £320K house:

https://www.westminster.gov.uk/council-tax/council-tax-bands...

So where did you get £300K/year from? Or are you saying that is what it should be?

Yes, I am saying tax land/real estate instead of complaining rich people want to live in it.

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