A taxing situation for Art

by The Times 100 on Monday 18th February, 2008

A taxing situation for Art

From 5th April 2008, non-domiciled residents who have resided in Britain for seven years must pay an annual fee of £30,000 if they want to be exempt from tax on their offshore income and gains. They will also lose their personal allowances for income tax and capital gains tax. Those who spend more than 183 days in the tax year in Britain will be deemed to be resident. As a result, many of the wealthiest foreigners, some of the most generous benefactors of the art world, plan to leave Britain. (The Times, 9 February 2008)

One observer said: 'Non-domiciles head to whatever city offers them the most favourable financial conditions and do their bit for the community. In the past 20 years, London has attracted them but they are now focusing on Geneva and New York.' (The Times, 9 February 2008)

According to the Director of the Tate gallery, the government's tax plans for non-domiciled foreigners will have an enormous impact on the country's museums and galleries. It may mean that the British public will miss out on seeing some of the world's greatest works of art. From April, bringing art into Britain will involve a tax charge of 40% of the art's value. If a non-domicile cannot bring artworks into the country without having to pay this tax, gallery exhibitions will be affected. (The Times, 9 February 2008)

A leading arts benefactor told The Times: 'The Tate will get slaughtered. Look through their list of donors. There are hardly any British people. Tate 2 is never going to get the money. The largest donors to the Tate, the Serpentine, the Victoria and Albert, the Ashmolean are foreigners. They will simply leave the country now.' (The Times, 9 February 2008)

According to Treasury estimates, the scheme would result in 3,000 non-domiciles leaving the country but would raise an extra £800 million. However, Lord Digby Jones, the Trade and Industry Minister, has said: 'Government plans to tax non-domiciles could damage London's top position in global finance. It could discourage top investors and business people from coming to the capital.' (International Business Times, 8 February 2008)

Read the Times 100 case study on HMRC, which is responsible for implementing the policies of government, without any prejudices towards or against one political group or another. It was formed in 2005 following the integration of the Inland Revenue and HM Customs & Excise departments and employs nearly 100,000 staff, (around 20% of the civil service). The department is not headed by a minister, but is accountable to the Treasury which is headed by the Chancellor of the Exchequer.

Sources:

The Times, 9 February 2008 (print edition)

The Times Online – Great art 'will be forced abroad by tax law' – 9 February 2008

The Times Online – Treasury adviser Bob Wigley slams nondom tax – 10 February 2008

International Business Times – Governement minister speaks against non-dom tax plans – 11 February 2008

The Times 100 Edition 12 Case Studies – HMRC, How HMRC collects tax revenue to support Governement policy

See also The Times comment 10 February 2008 (print edition)

Potentional study questions:

  • Define 'monetary policy' and 'fiscal policy'.
  • Explain how government policy affects businesses.
  • What effects could this external influence – the loss of philanthropic non-domiciles – have in the longer term on the running of museums and galleries if they no longer benefit from generous donations?

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