The European ‘exit taxes' that could make their way to Britain
Wealthy residents fleeing European countries are increasingly facing 'exit taxes', sparking fears that similar levies could be introduced by Rachel Reeves.
Germany, Norway and Belgium have imposed more stringent exit taxes in the past year. These levies are aimed at curbing the number of departures by rich residents by imposing a one-off tax on the value of their assets when they leave.
The Dutch government has also commissioned a report to explore the feasibility of imposing an exit tax for emigrants as part of wider measures to combat tax avoidance.
The raid comes as a number of high-tax European countries seek to stem the flow of high-net-worth individuals fleeing to low-tax nations such as Switzerland, Monaco and the United Arab Emirates.
A report by advisory firm Henley & Partners predicted that a net 16,500 millionaires will quit Britain in 2025, up from 10,800 last year.
While the study found Britain is forecast to suffer the greatest exodus, other European countries such as France, Spain and Germany are also struggling to retain the wealthy, with net departures of 800, 500 and 400, respectively.
The UAE stands to gain 9,800 millionaires this year, and Switzerland 3,000.
The Institute of Fiscal Studies and economists have suggested the UK should also consider an exit tax system to stem the outflow of wealthy Britons and members of the so-called non-dom population.
In September, the Resolution Foundation, a Left-leaning think tank closely aligned with Labour, called for emigrants to be hit with a capital gains tax charge.
The think tank said: 'An Australian-style exit charge should be introduced that levies capital gains tax when people move out of the country.'
Under current rules, investors pay no capital gains tax on UK shares if they leave Britain for more than five years.
Chris Etherington, of accountancy firm RSM, said Britain has historically resisted exit taxes because previous governments have not been concerned about the number of businesses and wealthy individuals leaving the country.
However, he expects pressure on Reeves to implement them will likely grow if she raises capital gains tax further.
He said: 'An 'exit charge' on individuals may be something that is looked at by the Treasury in the future but it's unlikely to be high up on the agenda at the moment.
'There will always be some people who wish to move overseas but the vast majority of business owners do not wish to do so and are satisfied with paying capital gains tax at the current rates.
'However, that could change if capital gains tax rates were pushed up higher as it might prompt more individuals to move abroad, with calls for an exit charge likely to increase as a result.'
Ms Reeves could follow the example of Germany, which levies unrealised capital gains at around 27pc, in line with the standard rate in the country. In Norway, the levy is as high as 38pc, but this has not stopped a number of high-profile individuals from leaving the country.
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