Tax, especially domicile and residence, can be quite taxing, it seems...

The increasingly bewildering debate about non-domiciled individuals and their taxation has dominated the past twenty-four hours or so. Bewildering because, for the most part, those doing the arguing only have a vague idea as to the technicalities involved. Now, before anyone jumps to the conclusion that I'm being somehow patronising, I should point out that this part of the UK tax regime is pretty complex, as are the implications. So, perhaps a little context would help...

I'll start with the simple stuff. If you are domiciled outside of the UK for tax purposes, then any income you receive outside the UK is only taxable in the UK if you remit it to the UK. That doesn't mean that it isn't taxed, necessarily. It may be taxed in the country it arises in, depending on their tax regime. You might reasonably assume though that, if it is worth paying HMRC a chunk of money to retain your non-domiciled status, there is a financial advantage in doing so.

So, in simple terms, the abolition of non-domiciled status, assuming that everybody stays where they are, would raise additional revenue. How much depends on where the money is held, how much there is, what is earned on it in terms of income and how much tax is already paid in the jurisdiction concerned. Remember, if tax is deducted abroad, and there is a Double Taxation Agreement in place, that tax is deducted from the liability in the UK. For the record, the UK has Double Taxation Agreements in place than virtually any, if not every, other developed nation.

So, that's the tangible, theoretically measurable stuff. It is complicated by questions of capital appreciation, outright evasion and banking/corporate secrecy, but the latter is less of an issue than it was, due to increasing international co-operation and transparency.

The intangible is, of course, how abolishing non-domicile status would impact on the behaviour of individuals. There are those who will argue that removing tax advantages may lead to some individuals establishing tax residence elsewhere - it probably will if the incentive to do so is strong enough. But, just as it is difficult to work out the fiscal benefits in terms of potential revenue gains, it is impossible to calculate how many high wealth individuals might up sticks and leave, or the fiscal impact of them doing so.

In truth, the retention of non-domicile is as much a principle as it is potentially a revenue raiser. If you are driven by a desire for equality of treatment, then abolition is probably a given. If financial prudence is your priority though, you might (and I only say might) want to look elsewhere.

It is perhaps a truism, but nonetheless, getting elected is one thing, governing is quite another. I fear that, in the ongoing debate, that concept has been somewhat overlooked...