Adrian Hamilton: Passive distaste has turned into active resentment of the wealthy

Click to follow
The Independent Online

For the past 10 years, Britain has steadfastly resisted all attempts by Germany, France and the Scandinavians to introduce Europe-wide rules to crack down on tax havens and the means by which the rich have avoided paying any local tax. It can't be done, said Gordon Brown as Chancellor. The moneymen, and the money, will only slip away to another tax haven in the West Indies or Asia. If you can't beat them, join them – and with terms just as attractive. Besides which, Britain was in the race to become the global capital of international finance. It wasn't going to be held back by the politics of envy in Bonn or Stockholm.

No longer. In the past few months, No 10 has reversed the position of No 11. Moving one door along, and eager to regain the high ground of tax politics, Gordon Brown and the Chancellor, Alistair Darling, have talked about a whole new approach of taxing non-doms, forcing disclosure of their foreign funds and clamping down on tax havens. Where once the rallying call to the world's wealthy was, "It's good to be rich. Come here and enjoy it without tax", the new cry is, "It's intolerable to be rich and not pay tax".

Does this mean that Britain is willing to rejoin a Europe now in full cry against tax havens and their customers? It would only serve the international rich right if it did. The excesses of the financial community in rewarding themselves, and their absolute refusal to co-operate with any kind of transparency for their wealth, have become a national outrage. So long as the economy kept growing it was deemed tolerable. Given the whiff of recession, fuelled by catastrophic investment decisions made in search of quick profits, and passive distaste has turned into active resentment. No government could stand aside from it, least of all a Labour government with declining opinion poll ratings.

And yet, Britain remains different from the rest of Europe in that we are a global financial capital. We have proclaimed our Unique Selling Point as our liberal tax regime compared to the rest of Europe and even America. Can we afford to lose it by overhasty action now? Already the global rich are threatening to leave in the face of the tax proposals on non-doms. Partly this is because the Treasury has mishandled the details, managing to threaten middle-earning foreign residents as well as the super-rich. But partly it is because those attracted to London fear that this is the thin end of the wedge.

In one sense, their fears are exaggerated. The Government has too much at stake in the City of London, particularly at a time of tightening credit, not to draw the fang of its tax proposals. But in another sense the rich are right to be nervous. Where once the international move to draw the world's tax havens into the regulatory process was driven by the urge to stop money laundering by international crime and to stem the flow of money to global terrorists, (and has made some headway in doing so), it now has the added piquancy of popular contempt for tax dodgers. And Britain, however unwillingly, has become part of that. Non-doms are one problem, home-grown users of tax havens are quite another. They have less power and no public sympathy. It would be a brave prime minister indeed who, having declared war on the avoiders and evaders, ran up the white flag at the first sight of resistance.