Pressure on the British Minister of Finance, Jeremy Hunt’s decision to maintain a tax regime that provides for tax exemptions is increasing, reports Bloomberg. If the regime in which people can qualify for the so-called status not domiciled (non-dom) taxpayers liquidated, it would increase the UK government’s tax revenue by 3.2 billion pounds, according to estimates by economists from the London School of Economics (LSE) and the University of Warwick.

To qualify for non-dom status, which grants tax exemption on income and wealth, as long as they don’t bring money into the country, the person must be a permanent resident outside the UK, according to UK tax authority. By 2021, an estimated 68,300 people claim to have tax-free income coming from abroad – a decrease from 76,500 at the end of 2020.

In court on Wednesday, Hunt defended the tax regime. He points out that non-doms “pay £8 billion in taxes every year”. Hunt fears tax revenue will be lost if the regime is terminated. “These are very mobile people, and I want to avoid a situation where they move on and we lose more than we gain.”

The tax regime can be traced back to the French Revolution and 1799, when it was introduced to protect British colonial investments, according to Ronen Palan, professor at City, University of London.

Lack of layers

The picture of consequence Hunt paints is one economists at the LSE and Warwick disagree with.

A joint report between LSE and Warwick published in October showed that when tax exemption rules were tightened in 2017, only 0.2 per cent of non-domes left the UK. In addition, they belong to the segment of taxpayers who have paid the least.

Arun Advani, professor of economics at the University of Warwick, said it was hard to find data to support Hunt’s claim that continued, but limited, tax revenue from non-domes was a good enough reason to continue the regime:

“A no-judgment regime is costing us because we don’t get tax revenue from these people. In addition, they have no incentive to invest their money in the UK. This is exclusively negative for the economy,” said Advani.