The UK’s super-rich “would never leave the country for tax reasons” because they fear they would be “bored to death” in “culturally barren” tax havens, according to new research by experts at the London School of Economics.
Researchers at the LSE interviewed 35 members of the UK’s richest 1% – by wealth or income – and found that none said they would leave the UK for tax reasons. “I wouldn’t go to a tax haven. Can you imagine anything worse than going to a tax haven?” one of the respondents, Leanne, who works in consulting, told the researchers.
“Some tiny little place with just people with yachts and servants. So no, I wouldn’t leave for that kind of reason … I want to live in a vibrant economic climate where there’s room for innovation and, you know, people are inventing, and I think London is like that.”
Another respondent, Luke, who works in law, said: “I have a nice life here [in London]. My clients who moved to the Bahamas were bored to death. Sun, sea and sand. OK, it’s great for a couple of weeks to charge the batteries, but after a while you think, ‘Well, I’d quite like to go and watch an opera.’ Well, you can forget that – there’s not a theatre in the Bahamas.”
Bea and Peter, a couple who both work in finance, said that if they “move to the Middle East, [you] are in gated communities and stuff like that. I never found that attractive in any way.”
Marianne, who works in culture, said the suggestion that there would be a “big brain drain” if the government introduced higher taxes on the wealthy was “complete nonsense. And I will give you the answer why in two words, and that is National Gallery or National Theatre … that’s why people aren’t going to leave London.”
The research by the International Inequalities Institute at the LSE found that the super-rich feared the societal “stigma attached to tax migration”.
“Interviewees were disparaging about those who chose to move for tax purposes,” the research paper said.
“Some judged tax migrants on moral grounds as unduly economically self-interested, while others expressed a snobbery about tax-advantageous destinations as boring and culturally barren.”
The research comes as public and political debate focuses on tax ahead of the general election expected later this year. The chancellor, Jeremy Hunt, last week indicated that there may be big tax cuts in his March budget, in what was seen as one of the last opportunities for the Conservatives to claw back Labour’s lead in the opinion polls. “I believe fundamentally that low-tax economies are more dynamic, more competitive,” he said.
Hunt has come under pressure to cut taxes amid forecasts from the Office for Budget Responsibility that they are heading for their highest level since the 1940s. Meanwhile, trade unions, the Green party and some members of the super-rich have called for the introduction of wealth taxes to help pay for battered public services.
A “modest” 1.7% wealth tax on the richest 140,000 people in the UK could raise more than £10bn to help pay for public services, the Trades Union Congress (TUC) suggested last year, but Labour and the Liberal Democrats have ruled out introducing such a tax.
While none of the super-rich people interviewed for the paper, entitled Tax Flight?, Britain’s Wealthiest and Their Attachment to Place, said they were planning to leave over tax, many said they were concerned that the top tax rates in the UK were currently too high and would rise further.
“A minority of interviewees said they would not rule out tax migration, but only if the political and economic conditions in Britain changed dramatically,” the paper said. “A return to top tax rates seen in the 1970s or a Jeremy Corbyn-style government were frequently cited as ‘red-line’ conditions.”
Sam Friedman, professor of sociology at LSE and lead author of the research, said: “We need to challenge the prevailing assumption that if you tax the rich, they will leave.
“The rich are not only strongly embedded, but they are also acutely aware of the stigma of tax migration – of being seen as unduly self-interested or moving to places others consider culturally barren and boring.”