Nothing new under the sun – Tax rises, wealth and the East India Company

There’s nothing new under the sun is perhaps a somewhat trite saying.

In Spring Budget 2024 we had significant announcements relating to the scrapping of non-dom status as a determining factor for the purposes of tax status.

With it, centuries-old tax advantages would also be removed and a more diluted exemption for foreign income and gains will take its place.

We are also in an election year, and already the frighteners are being put on the electorate by the Conservatives that a Labour government would mean higher taxes.

The irony of such a statement from a Government that has taken us to tax levels that  could easily induce something like fiscal vertigo is seemingly overlooked.

Then there’s the predictable argument against higher taxes or exposing non-doms to tax is that ‘if you raise taxes for non-doms, higher earners, the wealth creators and, well, the idle rich, [delete as appropriate] then they will up-sticks and leave the UK.

Of course, in a country like the UK, where more than half the population draw more in benefits than tax paid, and the top 1% of earners pay 30% of income tax, then it does not take that many of those at the top of the pyramid to leave to cause real problems.

But that’s not for now.

I’d rather talk about history (it frankly seems less bleak!) and return to my point about there is nothing new under the sun.

This fear of wealth taking flight is an argument as old as the hills – or should that be the foothills of the Himalayas?

A couple of years ago I read The Anarchy: The Relentless Rise of the East India Company by the excellent William Dalrymple.

After I posted my recent article on the Peasant’s Revolt I was reminded of the East India Company so I revisited an article I wrote shortly after reading the book

I set out that, as a sad tax person, there were certain paragraphs that caught my eye. One of these seems quite appropriate to this issue of the flight of wealth:

“The [East India Company’s (“EIC”)] emissary, Venetian adventurer Niccolao Manucci, who was now living as a doctor in Madras, replied that the EIC had transformed a sandy beach in to a flourishing port; if Da’ud Khan was harsh and overtaxed them, the EIC would simply move its operations elsewhere. The losers would be the local weavers and merchants who earned… through trade with the foreigners. The tactic worked.”

It appears that many of the same arguments about tax were being put forward in the early part of the 18^th Century.

In other words, if you try and tax the so-called ‘wealth-creators’ then they may leave and take livelihoods with them.

Some might say in the case of the EIC, that would not have been no bad thing!

It also seems to be the case that both parties are now saying that they will crackdown on avoidance – which seems to be a bottomless pit of money for funding various schemes – and also, perhaps the bigger problem these days, tax evasion.

Of course, whether there remains much to be wrung out of countering avoidance is debatable.

Regardless, this might require a shift in policy from the previous one of whittling down the resources provided to HMRC to perhaps giving them more scope and resources to chase delinquent taxpayers of various flavours.

Hopefully, the following methods of tax collection, set out in Dalrymple’s book, will not come back into vogue:

“…By the 1720’s Bengal was providing most of the revenues… and to maintain the flow of funds… became notorious for the harshness of his tax collecting regime.

Defaulters among the gentry would be summoned to the… new capital… and there confined without food or drink.

In winter, the Governor would order them to be stripped naked and doused with cold water…suspend [them] by the heels and [beat] the with a switch.

If this did not do the trick, defaulters would be thrown in to a pit which was filled with human excrement…”

Let’s hope I haven’t given HMT any ideas!*

*Nb – there are those that argue that some of treatment dished out to loan charge victims by  HMRC is perhaps a modern equivalent of the Bengal poo-pit. I couldn’t possibly comment.