If you want to know why the domicile rule survives despite the very obvious abuses it permits ….
It survives because the tax profession and banks make money from it.
And they are the people who are too close to writing too much tax law.
And so this abuse of most people in the UK goes on.
As ever he’s failing to note that the domicile rule works two ways. Sure, it means that some income of people resident in the UK is not taxed in the UK. But it also means that some income (or assets) of people not resident in the UK is taxed.
It’s the balance of these two that is important, not just the first one.
Imagine that we had a purely residence based system. That would mean that we get tax on the worldwide incomes of the current resident but non-doms (dependent upon how many of them stay, of course). But we would also not get tax from those who are UK domiciled but non-resident (Hiya! not that my putative tax payments would offset Abramovich’s). The rules on things like CGT (at least used to be), UK sourced income and IHT are rather in HMRC’s favour for those who are non-resident and yet still domiciled.
Further, it’s not entirely clear how the balance works out. There’s however many tens of thousands who are non-doms. But there’s millions who are domiciled but non-resident (all those pensioners in Spain would almost certainly qualify).
It would actually be fascinating to know whether the non-dom rules actually make a profit for HMRC or not. Two different calculations.
1) Does revenue lost to non-doms outweigh revenue gained from non-resident but doms?
2) Now rerun this with some reasonable assumptions about how many non-doms would stay on a purely residence basis.
My guess would be that 2) would be HMRC profits and 1), well, I think it might be a close run thing.