alt.lawyers

From The Sunday Times
February 10, 2008

Treasury adviser Bob Wigley slams nondom tax
Jenny Davey and David Smith

A LEADING adviser to the Treasury this weekend lambasted plans for a tax
crackdown on nondomiciled UK residents, heaping further embarrassment on
chancellor Alistair Darling.

Bob Wigley, the chairman of Merrill Lynch Europe, Middle East and Africa and
a member of the chancellor's "wise men" group who advise the Treasury on how
to keep London competitive, told The Sunday Times: "This proposal was
ill-conceived from the start. While it clearly has some political
attraction, the economic case is flawed."

Other investment banks are known to have lobbied the Treasury, arguing that
the new rules could damage London's position as a financial centre. Darling
has faced an avalanche of protests about the tax measures since details were
unveiled last month.

Nondoms are people whose family roots are outside the UK but who work here.
The proposed changes would levy an annual £30,000 on them if they want to
avoid UK tax on foreign income they keep outside Britain. More
significantly, Darling also wants to clamp down on nondoms' use of offshore
vehicles for tax avoidance.

A senior figure from Goldman Sachs -- where as many as 40% of employees are
thought to be nondoms -- has already been to the Treasury to argue against
the changes. A group of banks has arranged to see the Treasury next week.
And the London Investment Banking Association has complained to the
chancellor.

But Wigley's intervention is particularly embarrassing for the chancellor
because of his position as an adviser to the Treasury.

Wigley is UK-domiciled and is a member of the court of the Bank of England.
He said: "These measures were partly aimed at the nondomiciled billionaires.
They could, if not withdrawn or substantially amended, drive offshore young
upcoming talent that currently chooses to live in London, so making London
the leading global financial centre."

He added: "When you consider that most of those who could be driven away
probably don't use the state education or health systems but spend a lot of
their above-average incomes here, so contributing disproportionately to Vat
receipts, these are exactly the good-value taxpayers London should want to
retain."

Wigley has made direct representations to the chancellor in the past few
weeks. He also wrote to Kitty Ussher, the City minister, expressing his
concerns before Christmas.

It is believed that as many as 600 out of 6,000 Merrill Lynch employees in
Europe could be affected by the tax changes. Other big investment banks are
believed to have similar numbers of nondoms.

Wigley said: "By introducing change, the government has introduced
uncertainty into what has for a long time appeared assured. It may be too
late to put that genie back in the bottle, but real political will to
safeguard London's future as a leading global financial centre is required."

Lord (Digby) Jones, trade and investment minister, has voiced concerns, as
has Paul Myners, chairman of Land Securities and an ally of Gor-don Brown.
CBI deputy director-gen-eral John Cridland said this weekend that Darling
had underestimated the damage the tax change would do. "It is more and more
clear that the ramifications of this go much deeper than the chancellor
realised," he said.

"This has significant implications both for the City of London and the wider
economy. We need to remember how mobile a lot of these guys are. They can up
sticks and work at a desk in Dubai or Basle at a week's notice."

Until now, the suggested £30,000 annual levy on people wanting nondom status
has been the focus of the debate over the measures.

But since detailed proposals were published by the Treasury last month, it
has become apparent that measures to clamp down on the use of offshore
trusts could be far more significant for large numbers of nondoms. If
enacted, the new rules would mean that nondoms would have to pay
capital-gains tax on profits they make on houses owned through offshore
vehicles. And the Treasury is proposing rules that tax might be payable when
nondoms bring capital into Britain.

Concerns have been voiced about the potential impact on charities and the
arts. Bringing a work of art into Britain after April could be construed as
importing capital.

Lord Rothschild said this weekend: "I know one family that has donated over
£50m to good causes in the UK over the years. I'm sceptical that this will
go on in the new environment."

The CBI estimates nondoms account for £16 billion of spending and £7 billion
of tax revenues annually.

The planned tax will raise £800m in 2009-10 and £500m in 2010-11, according
to Treasury calculations.

http://www.nytimes.com/2008/02/05/health/nutrition/05symp.html