Call to Action for Labour: Clarify Stand on Departure Tax

Wealthy UK Residents Consider Exit Amid Exit Tax Fears

In the lead-up to this year's Budget, a notable businessman and former deputy chairman of the Conservative Party, Michael Ashcroft, has suggested that wealthy UK residents are leaving the country due to fears of an exit tax on unrealized capital gains. This concern is not unfounded, as recent surveys indicate that the UK has lost more billionaires than any other country, and entrepreneurs are considering making an exit.

The idea of an exit tax has been gaining traction, with professors at the London School of Economics' Centre for the Analysis of Taxation urging the government to introduce such a tax for more efficient and fairer standards, similar to those in Canada and Australia. Dan Neidle, a former Clifford Chance lawyer and chief of Tax Policy Associates, has also voiced his support for an exit tax, but has warned that rumours of its introduction could be damaging for the UK economy.

Neidle suggests that if the government is going to introduce an exit tax, it should do so immediately, outside the Budget cycle, to avoid fueling speculation of other tax hikes. However, the government has so far refused to rule out individual taxes, citing that it would drive speculation of other tax hikes ahead of this year's Autumn Budget.

The Institute for Fiscal Studies (IFS) and the Resolution Foundation have endorsed introducing a form of an exit tax in the past. Yet, no governing party has publicly declared whether it will introduce an exit tax system, nor where such a declaration should take place.

The Labour party, expected to raise more than £20bn in taxes this year, has few options on which taxes it could increase, having vowed not to raise income tax, VAT, or employees' national insurance. The business groups feel that introducing an exit tax could undermine Labour's efforts to attract investors, as firms would be dissuaded from setting up shop in the UK.

In response to Ashcroft's comment, Neidle tweeted that the government should publicly rule out an exit tax to avoid damaging the UK economy. Labour ministers are being urged to clarify whether the government will indeed introduce an exit tax.

The Chancellor, Rachel Reeves, is under pressure to clarify the government's stance on the issue. Corporation tax, which yields the government large portions of its revenue, has been capped at a 25 per cent main rate. Exit taxes, including reforms of capital gains taxes, are feared by City firms and global wealth specialists.

Global wealth specialist March Acheson suggests it could be "very tempting" for the government to introduce an exit tax due to public opinions on fairness. However, the potential economic consequences must be carefully considered. The debate on an exit tax continues, with the Budget fast approaching.