Labour’s proposed expat exit tax has come under fire from leading audit, tax, and business advisory firm Blick Rothenberg, which warns that the policy could drive Foreign Direct Investment (FDI) away from the UK to more tax-friendly countries like France.
Vanesha Kistoo, Head of Blick Rothenberg’s French Desk, described the proposed tax as “deeply flawed” and fiscally counterproductive, suggesting it would encourage wealthy expats to leave the UK or avoid moving there in the first place.
Kistoo highlighted that while the proposed exit tax aims to fill the financial “black hole” identified by Labour, it may have the opposite effect. “Wealthy expats will likely try to leave the UK before they have to pay the exit tax or simply not come to the country to begin with, meaning the exit tax take will diminish over time,” she said. Given that wealthy expats make up only 1% of the UK population, the expected tax revenue from this policy would likely be minimal and insufficient to address the nation’s financial challenges.
The proposed exit tax comes in the context of the UK’s new Foreign Income and Gains (FIG) regime, where tax relief is limited to four years. Kistoo noted that in comparison, France’s expat tax regime offers a more attractive option, with benefits extending for five years and exemptions on income tax for employment income and wealth tax on assets located outside France. Additionally, France’s exit tax only applies to those who have been residents for six of the last ten years, a condition that Kistoo hopes the UK will consider if it proceeds with the exit tax plan.
Kistoo stressed the need for the UK Government to focus on long-term growth by attracting and retaining wealthy expats, rather than implementing short-term tax measures that could drive them away. “If the UK Government wants long-term growth, not just a short-term tax take, they need to start to announce measures to continue to attract FDI into the UK. This means attracting wealthy expats rather than giving them more and more reasons to go elsewhere,” she added.
Labour’s proposed exit tax raises broader concerns about the UK’s competitiveness in the global market for investment and talent. The potential impact on FDI could have significant implications for the UK economy, as wealthy expats and investors seek out more favourable tax environments. As Labour continues to shape its fiscal policies, industry experts like Kistoo urge a careful reassessment of measures that could inadvertently undermine the UK’s appeal as a destination for foreign investors.
Read more:
Labour’s expat exit tax could drive foreign investment away from the UK, experts warn
