TIMESONLINE: Wednesday night. Cipriani, off Berkeley Square. A quiet family party at the back are speaking heaven-knows-what and eating Italian comfort food at £65 a head. A posse of hungry-looking money men in suits swallow champagne before being shown to their table. They are distracted (as am I) by two beautiful women sinking bellinis at the bar. And through the revolving door comes a man with a name like Davos. He has a furry torso busting out of his blazer, and a Blancpain watch the size of a beer mat.
Federico, the maître d’, goes through an elaborate pretence of not knowing who Davos is, then yells at the white-jacketed staff to fix him his usual apéritif and seat him at table 28.
Are these the creatures I have been looking for? The favoured ones, whom fate has blessed with money and the taxman with the mother of all loopholes? Are these the people who have made London the most cosmopolitan and expensive city in the world; the steel-smelting, penthouse-collecting Brahmins of 21st-century Eurasia? The people who, though they pay little UK tax, may contribute as much as £5 billion to the economy in other ways? Are these the wildly rich, non-domiciled UK residents known to their accountants as non-doms?
One of Federico’s colleagues has rashly confirmed as much over the phone. Another close observer of the scene has identified this place, along with Annabel’s and the George nightclub, as prime non-dom party locales. But they are safe here. Federico will only shrug. “This is London,” he says. “They come from everywhere.”
Of course they do. But London should not kid itself. It’s not Gordon Ramsay who secures for W1 the continued patronage of Roman Abramovich and Boris Berezovsky. It’s not the Royal Ballet (as far as we know) that induced one Qatari to pay £100 million for an as-yet unbuilt flat on Hyde Park. And it’s certainly not the weather that attracts the foreigners who comprise roughly half the hedge-fund managers in London, the hedge-fund capital of the world.
Above all, it’s the tax system, which takes 40 per cent of the average middle-class family’s earnings but only token amounts off non-doms, and then only if they are honest. This is the system that, in April, led the IMF to bracket London with Bermuda as an “offshore financial centre” (translation: tax haven).
Yet it is also a system that, for all its apparent iniquities, has put the international ultra-rich in the service of UK plc to the extent that we may no longer be able to manage without them. As one sage has put it, for Britain to tinker with its non-dom laws would be like Saudi Arabia giving up its oil.
Even so, tinkering is what both main political parties plan to do, with incalculable consequences.
On Monday, George Osborne thrilled the Conservatives with his promise of an end to inheritance tax as we know it, and he promised to fund this promise with a £25,000-a-year levy for the privilege of non-dom status. He claimed that this could raise up to £3.5 billion.
Osborne’s pledge has triggered a furious political row over non-dom numbers. Broadly defined, non-doms include all foreigners in Britain. No one knows how many there are, let alone how many would find it worthwhile to pay the levy rather than pay UK tax on all their worldwide income. The Shadow Chancellor put the figure at 150,000. Labour hit back with 15,000 – but the Treasury has since disowned the smaller figure, and so has much of the high-end accountancy profession. Brass tax: the truth about non-doms: Will the super-rich flee if Britain dares to tax them? By Giles Whittell
Mark Alexander
