Labour pledges to act on UK tax exiles

Ed Miliband has challenged the Conservatives to “stop defending the indefensible” and match a Labour pledge to strip wealthy individuals of their “non-dom” tax break status.

But he faced Tory claims that the policy was in “chaos” after it emerged shadow chancellor Ed Balls recently suggested that abolition could cost the country more than it raised as people left the country.

The opposition leader said a Labour government would end abuse of the colonial-era loophole by stripping the right to use it from anyone other than those living in the UK for a “brief” period.

He dismissed fears of an exodus of wealth and insisted that it was not only morally right to stop the UK operating as a “tax haven” but the reforms could also raise “at least hundreds of millions of pounds”.

Chancellor George Osborne said Mr Balls had been right in January to warn it would hit public funds but also claimed Labour’s plans amounted to a minor “tinkering” that would change little.

The use of “non-dom” status by long-term residents of Britain to protect overseas income from UK taxes — including high-profile figures such as Chelsea FC owner Roman Abramovich — has been a controversial political issue since the numbers spiralled under Labour.

Charges to use the status, which is unique to Britain among major economies, were imposed in 2008 and significantly increased since in an attempt to deal with the issue.

But in the latest salvo to persuade voters the Tories would prioritise the well-off, Mr Miliband said it was “a very British value that we all play by the same rules”.

“Why should people be able to enjoy all of the virtues of our great country and not pay tax like everyone else? Why should there be one rule for some people and another rule for everybody else?” he asked.

“It means higher taxes for working people and business people and starving money from our public services.

“It isn’t fair, it isnt just, it holds Britain back and we will stop it. The next Labour government will abolish the non-dom rule.”

In a January radio interview, Mr Balls said abolishing non-dom status “probably ... ends up costing Britain money because there will be some people who will then leave the country”.

UK prime minister David Cameron said Labour appeared “frankly pretty chaotic — on the one hand saying they want to get rid of non-dom status and on the other saying that if they did so it would cost the country money”.

Mr Osborne said exemptions for those staying temporarily in the UK, which Mr Balls said should be defined as around three or four years, meant “the majority of non-doms are not affected at all”.