I’m seeing lots of posts today about the proposals for an “exit tax” from the UK following a round robin letter signed by the great and the good of the London tech sector (spoiler alert: I’m not one of them). I’ve commented on a few posts but wanted to say a bit more than the character limit allows. First off, I’m in favour of low taxes for everyone and especially if they incentivise people to create, rather than hoard, wealth. I’ve also got no problem with people who manage their financial affairs to minimise their tax bill, so long as it is within the letter of the law - I don’t believe there is any moral imperative to pay a penny more than you legally owe (although you might also want to donate to good causes if you have surplus cash on your hands). That said, this “no exit tax” campaign seems wholly misconceived and of all things to speak up about, probably ranks among the most tone deaf and self-interested special pleading I’ve ever seen from the tech world. The beneficiaries of stopping an exit tax are those people who are currently UK tax resident but plan on going “off shore” shortly before selling their company for an eye wateringly high sum of cash - thus meaning they pay precisely nothing in Capital Gains Tax to the UK Treasury. Anyone who plans on staying in the UK through a sale of their business is totally unaffected, but we are being told that this new tax is a “nail in the coffin” of the UK being a great place to set up a business. The suggestion being that UK folks are going to move to Dubai before starting a company, confident that in a few years they will have a huge tax bill to avoid - or that foreigners will not move here to start a business (taking advantage of all the many benefits of the UK) as they’d be put off by the future liability (even though many other countries have a similar exit regime as is being proposed). This all sounds like wishful thinking from people who are now sitting on massive wealth and who want to make sure they retain the option to pay much less tax on it. Governments need to get taxes from somewhere, and right now the exit arrangements for entrepreneurs with huge uncrystallised gains seems like an obvious loophole to close. The camapigning efforts of the tech world should really be better focussed elsewhere, or not at all - remember how many of them said it was a great idea to vote for Keir Starmer…. Time to pipe down, chaps?
Very well said, Danvers Baillieu. I think we all should also not forget just how generous both Entrepreneurs Relief and the way that share options are taxed are compared to pretty much anywhere else in Europe (and the US for that matter). Though I'd say that quietly before the chancellor comes after those...
Totally agree, and what this campaign doesn’t mention is that some other countries already have broadly similar systems, as they want to see their public services paid for as well.
A surperbly persuasive and well thought out argument. The governemnt can and should do more to help entrepreneurs and start-ups, but I don't see why an exit tax will be particularly damaging. The other point I'd add is that I get incredibly angry at some on the left who think there is something 'bad' about wealthy people. In my experience they are just the same as everyone else with the majority good who understand their responsibility to contribute to the success of the nation by paying tax. The result is they are slightly less wealthy, but still wealthy, and they have the reward of living in a better country as a result.
Nicely argued Danvers. I fully agree that there is a big distinction between wealth that is put to use Vs storing them in assets. Taxing more on those assets and less on things that generate actual productivity makes sense to me
When “investors” have fully and fairly repayed the nation for the free ride they take out of justice, regulation, infrastructure , education, peace, innovation, health, and our environment /then/ they can complain. Until then, I’m not giving the noise from hyper-acquisitive sociopaths room in my head. Tax rates on passively acquired wealth are far too low on any historic or rational basic. The only argument against raising them sharply is how mobile “wealth” is between tax havens thanks to an army of fawning enablers. We could fix both: most desirable tax havens are notionally responsive to the UK, and most banking, tax, and accounting rule making bodies listen to us. Maybe American billionaires that claim to want biblical rules will agree to an additional 10% annual tithe on all increases in total wealth?
That might change with the budget - hence the non doms have already left and can’t physically come back for a long period
Most people who have wanted to exit have already exited - the infamous non doms
Alternatively they could cut spending…
Amen
Danvers Baillieu you make the point well and I agree the campaign is misconceived. On the one hand, many entrepreneurs began their big life gamble under UK incentives that have steadily been withdrawn (entrepreneurs relief reduction was massive) and feel betrayed by the shifting sands of our tax system. On the other, the UK gives big subsidies through R&D tax credits and grants to help the same founders get to exit and it seems wrong there's such a (relatively) easy way to then avoid payback. We should focus on incentivising entrepreneurs to make their fortunes and lives here by committing to a stable & long term tax incentives regime that rewards the enormous gamble founders take, recognises the benefit to our society of those gambles when they succeed, and encourages the lucky few to reinvest their time/money back into the UK. As an idea the CGT aspect of the regime could be grandfathered for those already on the startup journey even if policy changes? Only a few years ago the UK was a red hot destination for founders - but it has cooled recently through various factors including tax increases, regulation & anti-business policies and we should urgently reinvigorate the ecosystem.