Report Calls For Immigrant Tax Breaks In UK

by Robert Lee, Tax-News.com, London

10 August 2009

A new report has suggested that new tax incentives are needed to retain talented immigrants who have come to live and work in the UK, but who now seem to be leaving for pastures new in increasing numbers.

The report by the Institute for Public Policy Research (IPPR) shows that immigrants to the UK are tending to stay in the country for a short time and then leave. The outflow over the last two years is close to 400,000, and over the last 30 years, more than 3 million immigrants to the UK have subsequently left – around half of the total.

The IPPR said that the size of the exodus is increasing, with more than 190,000 leaving in 2007 - a number that is likely to be exceeded in 2008. The report recommends that the government take a number of steps to encourage more migrants to stay longer in the UK, including a points-based admission system, retention schemes, simplified visa extensions, and tax incentives.

"The migration debate in the UK is fixated with the idea that immigrants come to settle and not enough attention has been paid to the fact that more and more immigrants are spending only short periods in the UK,” said Tim Finch, Head of Migration at the IPPR. “Our research shows that many groups of migrants are now increasingly mobile. They are coming to the UK to study and work for short periods and then they are moving on. As global competition for highly skilled migrants increases in future years, schemes to retain migrants may become as important as attracting them in the first place.”

On the issue of tax, the financial services industry has warned that the government’s decision to remove tax allowances for those earning more than GBP100,000 annually, and to introduce a 50% tax bracket on income over GBP150,000 from next year, will also deter talented foreign professionals from working in the UK, or encourage those that are already working in the country to leave.

Boris Johnson, Mayor of London, has claimed that 145,000 Londoners earning over GBP100,000 will be hit by the new “banker tax”, including 83,000 earning over GBP150,000 a year.

“Far more than the rest of the UK, London has an internationally mobile workforce, and its success depends on being a global magnet for talent and business,” said Anthony Browne, the Mayor of London’s policy director, following the 2009 budget announcement.

Sean Drury, international mobility partner at PricewaterhouseCoopers LLP, said that the IPPR’s report is a “timely reminder” of the risks of losing talent to the global economy, and he suggested that unless the UK government addressed the problem, highly mobile employees will vote with their feet and relocate to countries with better tax regimes.

“As we begin to emerge from the global economic downturn, the 'super mobile' will again become increasingly valuable to global employers. Getting the right people to the right market at the right time will be a significant source of global advantage for businesses,” Drury observed.

“Key talent will become increasingly attracted to those locations that meet their quality of life and personal wealth creation needs. Countries which have low barriers to entry will attract these employees and, ultimately, their employers. There are clearly risks to the UK economy if it is not attractive for the super mobile. Increasingly, we are seeing foreign governments, especially within Europe, give specific tax breaks for such mobile employees, such as in France, Spain, Switzerland and Belgium," he concluded.

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