Left-wing tax campaigners are constantly pushing each other to new extremes. With Labour in power they’re fighting to get the attention of PM Keir Starmer and chancellor Rachel Reeves, by suggesting one new tax raid after another.
The Resolution Foundation, whose boss Torsten Bell is now a Labour MP, has already targeted savers by calling for a £100,000 lifetime cap on Isa savings in the autumn Budget on October 30.
It’s urging Reeves to hike capital gains tax and slap inheritance tax on unused pension pots, too. As if that wasn’t enough, it’s also calling for hikes to national insurance, business rates, council tax and road pricing.
That’s an awful lot of tax hikes but its latest suggestion is the most radical yet.
Thousands of millionaires and entrepreneurs are said to fleeing the UK ahead of Labour’s Halloween Budget. They want to get out before Reeves gets stuck into their money.
The Resolution Foundation has hit up on the solution.
To slap an exit tax on them before they go.
It wants to punish anyone relocating overseas by hitting them with a capital gains tax (CGT) charge at the exits, according to today’s Daily Telegraph.
Currently, entrepreneurs and investors pay no CGT on UK shares if they leave Britain for more than five years.
The Resolution Foundation wants this rule scrapped and an exit charge applied instead.
With CGT rates set to rise, this could cost relocating Brits up to £45,000 of every £100,000 they have.
As yet, it isn’t clear whether this exit charge will apply to assets other than shares, such as property and businesses. But I bet it would.
The UK already faces a net loss of up to 9,500 millionaire this year, more than double the 4,200 who left in 2023, according to the Henley Private Wealth Migration report 2024.
Talk of an exit tax could turn that into a stampede.
I can see the appeal to Labour social warriors. And it could deliver a short term cash injection for the Treasury. But I fear it would wreak long-term damage.
The proposed raid on foreign non-doms seems likely to cost the UK more in lost tax than it makes, as many up sticks and take their wealth and businesses elsewhere.
Instead of raising £3billion as Reeves hopes, it could end up costing the UK £1billion in lost revenues.
An exit tax would make things much worse.
Constant Labour tax threats are causing widespread alarm, and there’s another six or seven weeks of this before Reeves delivers her Budget.
The message is out there – the UK is not a welcoming place for people who want to set up businesses and make money. Instead, entrepreneurs will be treated as a combination of cash cow and social pariah.
True, the US has an exit tax. But it’s also the best place on earth to build a business, and most entrepreneurs wouldn’t leave anyway.
The UK is a grey and rainy island that’s had to work hard to attract hyper-mobile entrepreneurs by making the country a good place to do business.
We’ve got precious little in the way of natural resources. And the few we do have, such as North Sea oil, looks set to be wiped out by Labour tax raids.
It’s got our financial services sectors in its sights, too, with talk of a windfall tax raind on the big banks.
By threatening to tax anybody who’s had enough and wants to leave the country, Labour will deter entrepreneurs from coming to the UK and setting up businesses in the first place.
It will also drive existing talent abroad before they make any capital gains. They’ll find a country that let’s them keep their money rather than grabbing it at every opportunity.
And doesn’t block the exits if they decide to move on.
Ultimately, an exit tax will cost more than it saves. Let’s hope Reeves ignores it but the idea is out there now, and soon all the other left-wing think tanks will be calling for it too.
