In this opinion article, the author has another look at the market in what are sometimes dubbed "golden visas" (a term that isn't always liked) and the UK's non-dom regime.
A regular topic for opinion pieces here (see this article, for example) concerns the programmes that jurisdictions have to encourage HNW individual investors and entrepreneurs, and the residential non-domiciled system (“non-doms). They can be controversial politically in this age of zero-sum thinking about wealth, and amidst concerns (not always unfounded) that these channels allow in laundered money. With governments’ public coffers under strain, and where capital is mobile, it’s unlikely that certain countries will abandon these programmes. Last year, the UK closed its Tier 1 Investor Visa system (it retains schemes aimed at startup creators and entrepreneurs); Ireland has scrapped its system and Portugal’s government says it wants to shut its programme down. The market for “golden visas” is under pressure, and arguably, this is part of a wider set of challenges for that trend in human affairs known as globalisation.
Sean Kiernan, who is chief executive of Greengage, a provider of e-money accounts for small- and medium-sized enterprises, high net worth individuals and digital asset firms, sets out why he thinks the UK should reconsider its closure of the Tier 1 Visa, and why it should also not further erode the residential non-domiciled tax system in the UK. The editors are pleased to share these views, and the usual disclaimers apply. To jump into the debate, email firstname.lastname@example.org
It seems almost taboo these days to talk about the benefits for a country of growing its ranks of wealthy inhabitants, let alone of attracting such individuals from abroad. The wealthy contribute significantly to the economy: they invest in businesses, create jobs, and generate income for the country. Wealthy individuals also contribute a significant amount of tax revenue to the government, which can be used to fund public services and infrastructure projects.
And yet in February 2022, in the same month as the start of the war in Ukraine, the UK dismantled the Tier 1 Investor Visa programme – which had been offering UK residency in return for investment into the country – given (understandable) concerns that it was being used for money laundering and other illicit activities. The decision was seemingly taken quickly, without a public process of consultation. Might it perhaps have been more sensible to tighten controls and go after firms abusing the system, than to discard the wheat along with the chaff?
This [investor visa] programme had never been a massive driver of immigration (always considerably less than 0.01 per cent of total immigration per annum) but had been a conduit for investment into the country from all over the world. Russians constituted 18 per cent of total applicants – including many who have now become well integrated into the UK polis – but by no means the majority. This programme otherwise opened up access largely to wealthy individuals coming to live in the UK from the likes of China, the USA, Hong Kong, India and Canada.
The UK was not alone in its decision to disband the Investor Visa, other countries including Portugal and Ireland have recently halted or significantly changed similar programmes. However, several other countries such as the US, Spain and Greece continue to operate them; this is an important subject because the popularity of such visas, or lack thereof, is on one level a barometer of globalisation, and on another, reflects the UK’s appetite for attracting international wealth.
Depending on the results of the upcoming UK general election, there are also questions concerning the ongoing continuation of the much more popular resident non domicile (“non dom”) status which has been even more successful in bringing international wealth to the UK. In the tax year ending 2021, HMRC estimated that there were 68,300 individuals claiming non-dom status, down from 76,500 in 2020. Some of this decrease is down to a natural trend for individuals to shift directly to UK tax status after a certain period (the “deemed domicile” rule), as well, at times, to political uncertainty.
Significantly, the number of registered non-dom taxpayers in the UK has halved over the past seven years from a peak of 123,000 in 2015. London, in particular, has thrived on such international wealth and has been an economic engine for the country as a whole. However, while the UK is still an incredibly attractive place for the wealthy to base themselves, it is by no means the only show in town.
Most importantly, while the Government has been raising tax rates for a broad segment of the population, primarily the mass affluent and corporations, there has not been much of a concerted effort to attract the wealthy who could partially offset this increase. This is unfortunate, as the higher tax burden is falling on those proportionally more affected by a cost-of-living crisis driven by inflation in everyday goods and services.
It is potentially a difficult argument for the political leadership to make the case for wealth (perhaps given their own personal monies) but by attracting and retaining wealthy individuals, the UK can improve its overall standard of living and enhance economic growth. The wealthy often have the resources and expertise to fund and develop innovative ideas and technologies for the businesses in which they invest their time and money. It makes much more sense to aim for growth, if not even enhanced productivity through investment, than to tinker with tax rates.
There should be a sense of pride that the UK, or indeed any country, is a hospitable place to welcome those who want to invest their monies in its success. It is perhaps unsurprising that several of the names on the annual list of top 100 UK taxpayers come from an international background, which for many people is also a source of pride. Re-basing the programmes and initiatives that can attract those with international wealth, such as the Investor Visa and non-dom status, so that they can establish residency in the UK, will surely yield economic fruit. It is much better to grow the overall economic pie with their support.