STEPHEN HUGH-JONES | ON LANGUAGE AND LIFE | February 16th 2008

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Stephen Hugh-Jones takes to task Britain's silly tax laws for "non-domiciled" residents. As the government threatens a plan to get these folks to pay, howls and squeals of woe can be heard in the City's finest restaurants ...

Two things in this world, we are told, are certain: death and taxes. If it was ever true, this truism, like many, is untrue today. Death is ultimately a fact of life, granted; but there's a huge industry whose sole, and often successful, purpose is postponing it into the indefinite future. As for taxes, look at the corporate brass plates in any tax haven. Or indeed settle in Britain, where you won't even need a brass plate. You can escape the worst of taxation there altogether.

All you need is a foreign passport. You can't (unless you're a diplomat, and not always even so) avoid indirect taxes: x pence on a pint of beer, y on each litre of petrol, say. But for income taxes, all you need on top of your passport is a readiness to assure the taxman that one day, cross your heart (and fingers too), you will be leaving Britain permanently, whether for your homeland or, say, one of the Cayman Islands.

At that moment you become "non-domiciled", a word that will stretch as far as any skilled tax-adviser and a degree of economy with the truth can make it. And lo, your liability to tax on your income or capital gains outside Britain, which any Briton has to pay (in theory), vanishes. No matter how long you've lived in Britain, no matter how huge your offshore income, you're in the clear. And if death does catch up with you before your long-promised departure, will your heirs face a demand for 40 years' back taxes, or even one? Not bloody likely.

This tax perk for "non-doms" has existed since forever. But even under Gordon Brown, who never laid a finger on it in his ten years managing Britain's public finances, the government has at last decided that it goes too far, and plans to rein it in. Not ferociously, of course: pay £30,000 a year (say, $60,000)--the tax, at Britain's 40% top rate, on £75,000--and your entire offshore income is in the clear. And, just by the way, the new rules will apply only after your first seven years' residence in Britain.

Fair enough, indeed more than fair, the average tax-paying Briton might think. Not so the non-doms. And when it became clear this month that the Brown government did (for once, more or less) mean what it said, their squeals of woe were transformed, via a well-managed publicity campaign, into a roar of righteous outrage from the City of London and the conservative press.

The essence of it has been that wealth-creating foreigners would flee Britain in droves if, as the London Times put it (with more colour than fact), they had to "pay through the nose for the privilege of visiting our shores". Britain's business-friendly reputation would go with them, deterring others from coming in. The City, the economy, nay "the fabric of  society" are at risk.

And not alone. So too, it seems, are Britain's fine-dining tables (where the non-doms eat), its Tate gallery and others (which they lend works of art to), even its football teams (several of which they own). All have been dragged in, to give width as well as weight to this jeremiad. I dare say my local Indian curry-house would be there as well, if its actually Bangladeshi owners, or their clients, were rich enough.

Some of all this may be true. No one knows how large the fleeing droves might be: the government says only 4,000 non-doms would even be affected. These, it's true, would be the richest. But no one knows how many of them would actually go. Nor how many non-doms already leave before seven years are up--a gaping hole in the taxman's intended net which the outraged roarers seldom mention. As they seldom mention that every argument against taxing foreign wealth-creators could largely apply to taxing British ones.

No matter: why bother with facts? Or indeed with consistency. The Times solemnly denounced the proposed £30,000 as "regressive, because it does not vary in line with an individual's ability to pay". Indeed it doesn't, like any indirect tax: the tax on beer, or instance. But never till now have I read the conservative press urging that "point of principle" as an objection to tax changes.

Nor yet did I imagine a paper (guess which one) so fiercely backing a special tax law for a few privileged residents within days of denouncing a proposal for Britain to accept some elements of Islamic law, on the ground that "it is fundamental to this democracy that there should be one law for everyone". And straight-faced. One or the other, so be it. But please, not both.

The government has already made some concessions. This week it retreated from its plan to make one element of the change retroactive; and a modification to ensure the continuing flow of works of art. (A mixed blessing, in my philistine eyes, as I think of the junk in London's Tate Modern, whose panjandrums first raised the issue.) The American embassy has pointed out that Uncle Sam taxes his citizens abroad, but for some reason will not give them credit for the famous £30,000. Quite why British tax law should be altered to remedy an oddity in American law is unclear, but I guess it will.

Still, whatever the howls from the City and division within the government, most of the plan will probably get into law. And the Tories will find it hard to object: they too have proposed a slightly smaller annual charge on non-doms, but, strikingly, without the seven-year grace period. What the real effect on Britain's economy will then be is anyone's guess. Mine is not very much. Six years and 11 months is a long time, after all. And anyone who might like to stay longer, but can't afford a tax adviser smart enough to arrange his affairs appropriately within that time, is probably not creating overmuch wealth anyway.

Perhaps one should even be encouraged by the brouhaha. Economic advance has been driven by the energy of human greed since we came out of caves. And, whatever else, Britain's fat cats are showing a wondrous energy in defending the class privilege of foreign ones.

(Stephen Hugh-Jones is a former writer and editor for The Economist, where he wrote the Johnson column from 1992-99. He lives now in West Sussex.)