Labour’s proposed expat exit tax has come under fire from leading audit, tax and business consultancy firm Blick Rothenberg, which warns that the policy could drive foreign direct investment (FDI) out of Britain to more tax-friendly countries like France.
Vanesha Kistoo, head of Blick Rothenberg’s French division, described the proposed tax as “deeply flawed” and fiscally counterproductive, suggesting it would encourage wealthy expats to leave the UK or not move there in the first place.
Kistoo stressed that while the proposed exit tax aims to fill the financial “black hole” identified by Labor, it could have the opposite effect. “Wealthy expats are likely to try to leave the UK before they have to pay the exit tax or simply not come to the country, meaning the exit tax will decrease over time,” she said. Given that wealthy expats make up only 1% of the UK population, the expected tax revenue from this policy would likely be minimal and insufficient to address the country’s financial challenges.
The proposed exit tax comes in the context of Britain’s new Foreign Income and Gains (FIG) regime, in which tax relief is limited to four years. Kistoo noted that in comparison, the French expat tax regime offers a more attractive option, with benefits lasting five years and income tax exemptions for employment income and wealth taxes on assets located outside France. Furthermore, France’s exit tax only applies to those who have been residents for six of the past 10 years, a condition Kistoo hopes Britain will consider if it goes ahead with the exit tax plan.
Kistoo emphasized the need for the British government to focus on long-term growth by attracting and retaining wealthy expats, rather than implementing short-term tax measures that could push them out. “If the UK government wants long-term growth, not just short-term tax measures, they need to start announcing measures to continue to attract foreign direct investment into the UK. This means attracting wealthy expats instead of giving them more and more reasons to go elsewhere,” she added.
Labour’s proposed exit tax raises wider concerns about Britain’s competitiveness in the global market for investment and talent. The potential impact on foreign direct investment could have a significant impact on the UK economy as wealthy expats and investors look for a more favorable tax environment. As Labor continues to shape its fiscal policy, industry experts such as Kistoo are calling for a careful reassessment of measures that could inadvertently undermine Britain’s appeal as a destination for foreign investors.