Ireland could offer itself as a home to some of Britain's wealthiest residents if a Labour government was elected in the UK and followed through on threats to abolish a rule which allows some people to mitigate their UK tax liability.
Labour leader Ed Miliband has declared that, if elected in the forthcoming election, he would end the regime which allows those who are resident, but not domiciled in the UK, to avoid paying tax on their worldwide income.
British legacy
Ireland operates the same non-domicile regime, a legacy of British rule, according to Tim O’Rahilly, a partner with PricewaterhouseCoopers. But unlike in the UK, there has been no political pressure here to abolish it.
“It works in the same way. If a non-Irish person lives in Ireland and is tax-resident here, they only pay tax on Irish income and capital gains,” he says, adding that Irish tax is only payable on foreign income if it is brought into the State.
John Bradley, a partner with KPMG, suggests the Irish non-dom regime is even more attractive than that in the UK, as a result of £90,000 charge, which was introduced in the UK last year, for non-doms who have lived there for 17 of the past 20 years.
Non-dom regime
Mr Bradley says the non-dom regime is quite unique to Ireland and the UK.
“Most European countries would tax citizens, once they’re resident, on worldwide income,” he says.
The number of people living in Ireland on a non-domicile basis is understood to be limited at present – estimated at fewer than 100. In the UK, about 116,000 are said to avail of the regime.
Given the proximity of the two countries and the similarities of the regimes, Ireland could offer an alternative base for the oligarchs and oil sheiks who have flocked to London if the Labour Party gets elected and follows through on abolishing the rule.
Competitive advantage
“It can’t do any harm if they abolish it and we keep ours,” says Mr Bradley, arguing that to stay competitive “I think Ireland needs to keep it”.
Mr O’Rahilly says Ireland would still not be seen as being as attractive as London for ultra-rich people, but “there might be the odd one”.
The gains of attracting this cohort of people could be substantial.
Figures compiled by the Daily Telegraph show that 115,000 non-doms are paying as much tax as 10 million British workers.
To qualify as a non-dom in Ireland, a person has to have a non-Irish parent, similar to the UK regime, or qualify based on a domicile of choice.
As has been reported in the UK, this rule appears to have some grey areas, with some claiming that a foreign newspaper subscription is all that is required to prove non-domicilation.
