UK rich say tax havens are ‘boring’ and ‘culturally barren’
Cultural snobbery plays an important role in preventing a flight by the rich in the UK to so-called tax havens, a new report has found.
The London School of Economics has just released a new study called Tax Flight? Britain’s wealthiest and their attachment to place.
The report explores the migration decisions of Britain’s wealthiest and highest earning individuals.
It draws on “in-depth interviews with 35 individuals, all of whom were in the top 1 per cent of the distribution by income and/or wealth, to explore whether top earners and wealth holders in Britain would consider migrating for tax reasons and what they value most when deciding where to live”.
The report, which did not specifically mention Bermuda, which is often labelled as a tax haven, said that many people interviewed expressed a cultural snobbery about the destinations that tend to be chosen by tax migrants.
“Places like Dubai, Switzerland, Singapore, Hong Kong, the Bahamas or the Cayman Islands were characterised as ‘boring’ and culturally barren”.
One person, (Leanne, in her sixties, consulting), was quoted by the report as saying: “I wouldn’t go to a tax haven. Can you imagine anything worse than going to a tax haven? Some tiny little place with just people with yachts and servants.
“So no, I wouldn’t leave for that kind of reason. I mean I do despair of, I mean I want to live in a vibrant economic climate where there’s room for innovation and you know people are inventing and I think London is like that.”
• None of the individuals interviewed were planning to migrate out of the UK for tax reasons or were actively considering tax migration in the future. Furthermore, among those who had made the decision to leave the country, tax did not feature as the central driving force for their move.
• The vast majority would never consider migrating for tax reasons. A combination of career risks, administrative burden, familial upheaval, attachment to the places they call home and reputational risk, were cited as the main reasons underpinning this decision. However, many were concerned that top tax rates in the UK were currently too high and would rise further.
• There is a stigma attached to tax migration. Interviewees were disparaging about those who chose to move for tax purposes. Some judged tax migrants on moral grounds as unduly economically self-interested, while others expressed a snobbery about tax-advantageous destinations as boring and culturally barren.
• A minority of interviewees said they would not ‘rule out’ tax migration but only if the political and economic conditions in Britain changed dramatically, such as a return to top tax rates seen in the 1970s.
• Interviewees were sceptical about the prevalence of tax migration in the UK. Most acknowledged that tax was a factor in decisions they and their wealthy or high earning colleagues and friends made about where to live, but this was rarely decisive.
• Interviews with London-based individuals revealed that the most important factor underpinning their reticence toward tax migration is the attachment they have to Inner London as a place to work and live.
• Key ‘pull’ factors were easy access to London’s unparalleled cultural infrastructure (particularly high culture like opera, theatre, ballet, contemporary art), the ability to maintain key social ties, access to privatised health services and private schools, and a more general attachment to British culture and values.
The report said: “A key barrier to tax reform in the UK is concern about the migration responses of the very wealthy and top income earners.
“Politicians, commentators, and senior figures in the private sector commonly issue very public warnings that increasing tax on high earners or wealth holders will lead them to leave the country, with negative impacts on the national tax base and the economy as a whole.
“There has been, for example, extensive media coverage of the tax-motivated migration of certain high-profile business figures such as Sir Jim Radcliffe and Sir Richard Branson.
“More recently, fears have also been voiced that the super-rich will leave the UK if the Labour party comes to power and abolishes the ‘non-dom’ tax regime.
“Yet evidence for tax-induced migration is more modest than politicians and the public commonly presume.”
It added: “This is not to say that the wealthy and high-income earners are not responsive at all to tax changes.
“Existing studies using tax data show that people who have already migrated before, for example, do tend to be more responsive than natives to tax changes and there is often a statistically significant migration response overall.
“However, the key point that emerges from this research is that generally such effects are not large enough to matter for fiscal purposes, because the overall impact of tax increases on migration rates among top earners and the wealthy is sufficiently small that it is more than outweighed by the additional revenue generated from those who stay (and those who continue to arrive).”
• For the full report, see Related Media
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