A non-domiciled resident is someone who doesn't pay UK tax on overseas income, unless they bring it into the UK. The big news in Westminster this week is that Lord Ashcroft, the Conservatives' deputy chairman and a significant party donor, has revealed he is a non-dom. Clearly this is embarrassing for the Tories, and one wonders how they have allowed such a row to blow up just months before a general election.
Nevertheless, it has always been my conviction that rather than restricting or even abolishing non-dom status, its benefits should be extended to everyone. To put it another way, governments should only tax income earned inside their borders and accept that what happens elsewhere in the world simply shouldn't concern them. This is the principle of territorial taxation. To me, it just seems like common sense.
Taxing worldwide income is problematic for a number of reasons. The first is that income or profits made overseas will most likely already have been taxed. Taxing them again would be double-taxation, something which is antithetical to free trade and free global markets. The second is that 'worldwide taxation' implies that the state owns its residents, and that it is entitled to a slice of everything they have, anywhere in the world.
And that is very, very different from the more reasonable (though still somewhat unsatisfactory) justification of taxation, which says that you ought to pay tax on revenue generated under the protection of a particular government, since your ability to make money is to some extent dependent on the institutions (particularly the rule of law and the enforcement of contracts) that that state provides.
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