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Last Updated: Friday, 8 February 2008, 12:01 GMT
Minister says tax plans hurt City
Lord Jones
Lord Jones says it could get harder to attract wealthy investors
The Trade and Industry Minister Lord Jones said London's top role in the global finance could be damaged by plans to tax wealthy foreigners.

Lord Jones says the proposals will make it harder to attract top investors and business people to London.

The Treasury plans to charge foreigners who have claimed tax-exempt status on their overseas earnings for more than seven years, 30,000 ($58,400) a year.

Lord Jones says he has already been asked about the plans on trips abroad.

Government of talents

"It has caused people to say 'Does this mean you don't want us?'," the minister said in an interview with the Financial Times newspaper.
Sir Digby must make up his mind whether he is a member of the government or a business lobbyist
Brendan Barber, TUC General Secretary

But the government agency that promotes UK inward investment has defended his remarks and said that he still supported government policy.

"Lord Jones was registering concerns that he picked up while abroad promoting Britain to foreign investors - as it is his role to do," a spokeswoman for UK Trade and Invest said.

"But he made clear in the interview that he believes it is reasonable that those who are coming here to enjoy the opportunities Britain provides make a contribution towards its prosperity after seven years."

"He is clear that the UK remains an excellent place to invest and is confident he can go on successfully making that case to people who are considering investing in the UK," she added.

Lord Jones was one of several appointments that Prime Minister Gordon Brown made from outside the political arena.

But his so-called "government of talents" has caused some controversy.

Security minister Admiral Lord West had to withdraw comments that conflicted with the government view of whether the police need to hold terrorist suspects for more than 28 days.

And development minister Lord Malloch-Brown got into trouble when he revealed that British officials had been in contract with Hamas.

Tycoons and princes

The government is consulting on changes to the non-domicile rules until 28th February.

At the moment people with links abroad, but living in the UK can declare another country as their real home.

As a result they pay no UK tax on their earnings outside the UK.

Greek shipping tycoons, Saudi princes and American businessmen have all taken advantage of the laws.

Few other countries have such a loophole.

Most like the United States, insist that if you live in the country you have to pay taxes there too.

Tax loopholes

The proposal to change the UK rules are very unpopular in the City of London, where it is feared that wealthy overseas investors might locate elsewhere.

The Treasury estimates that its plan would cause around 3,000 non-domiciled residents to leave, and would raise 800m in extra tax.

The government has already closed tax loopholes that allowed UK investors to hold funds offshore.

A recent poll of advisers to wealthy clients showed that half of them were considering leaving the UK in response to the tax crackdown.

Modest proposals

Unions are unimpressed with Lord Jones' comments.

TUC General Secretary Brendan Barber said: "Sir Digby must make up his mind whether he is a member of the government or a business lobbyist.

"The truth is that these extremely modest proposals to make non-doms pay a flat charge for their tax-avoidance will have little impact on the super-rich.

"If he thinks that the UK's prime attraction is that it is a tax-haven, he cannot have very much faith in the product."

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