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UK opposition Labour pledge to end ‘non domicile’ tax status

Britain’s opposition Labour Party yesterday pledged to scrap tax rules that allow wealthy individuals to legally reduce the amount of tax they pay on money earned overseas if the party wins a national election on May 7.

The change would affect about 116,000 people who live in Britain but who currently are not required to pay tax on income earned abroad, unless they bring the money into the country, under the so-called non-domicile or “non-dom” tax rules.

The plan highlights the centre-left party’s willingness to pitch itself against the wealthy to win over voters and edge ahead of Prime Minister David Cameron’s Conservatives in what polls show is a neck-and-neck election race.

“There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain, like you and me, but aren’t required to pay taxes like you and me because they take advantage of what has become an increasingly arcane 200-year-old loophole,” Labour leader Ed Miliband said in a speech.

We need to get the deficit down in a fair and balanced way

The laws date back to the late 18th century, when they were introduced to protect British citizens with assets in overseas colonies from income taxes introduced to fund an expected war with the French Emperor Napoleon Bonaparte.

Labour, which has already promised to tax high-value homes and raise the top rate of income tax, frequently accuses the centre-right Conservatives of protecting the rich at the expense of ordinary voters. “We need to get the deficit down in a fair and balanced way and it’s fair to say those with the broadest shoulders should make a bigger contribution,” Labour finance spokesman Ed Balls told BBC radio.

Labour estimated its proposals, which could be implemented by April 2016, would bring in hundreds of millions of pounds to the public purse.

The party said it would introduce new rules for temporary residents who are in Britain for study or work purposes, meaning they would only be taxed on income and gains earned in Britain.

Balls said this temporary period could last around two to three years.

Conservative Finance Minister George Osborne criticised the Labour approach, saying the exemptions for temporary residents meant the tax-status was not truly being abolished.

Osborne has said he would raise £5 billion per year in the next parliament by clamping down on tax avoidance and evasion, including reforms to the non-domicile rules.

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