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Cameron Under Pressure Over MPs' Tax Status

by Robert Lee,, London

17 December 2009

Legislative proposals put forward by David Cameron, leader of the UK's main opposition Conservative Party, which seek to ensure that all Members of Parliament (MPs) and peers in the House of Lords pay full UK income taxes, have been criticized for being half-hearted and ineffective.

The Conservatives have submitted an amendment to the Constitutional Reform Bill which stipulates that all MPs and peers must be "domiciled and ordinarily resident" in the UK before they will be allowed to take a seat in parliament. However, according to the ruling Labour Party, the term "ordinarily resident" as opposed to simply "resident" will still enable wealthy lawmakers and parliamentary candidates to forgo tax on their overseas income by allowing them to benefit from non-domiciled – often referred to as "non-dom" – status, whereby tax on foreign income is only taxed when remitted to the UK.

The issue of MPs' tax affairs has been brought into sharp focus after it came to light that Zac Goldsmith, the environmental campaigner and prospective parliamentary Conservative candidate for Richmond in south west London, claims non-dom status, meaning that a substantial portion of his wealth inherited from late tycoon Jimmy Goldsmith is not taxed in the UK.

The Conservatives are also under pressure to force Lord Ashcroft, the party's deputy treasurer and one of its main donors, to explain his tax affairs. Ashcroft, who has significant business interests in Belize, has repeatedly refused to throw open his tax records to public scrutiny, insisting that this is a private matter.

Unsurprisingly, the ruling Labour Party seized on the opportunity to undermine Cameron's proposals. “Read the small print of the Tory amendments and you’ll find a loophole that would enable individuals to escape UK tax on their foreign earnings,” Justice Secretary Jack Straw said.

Liberal Democrat Shadow Home Secretary, Chris Huhne, denounced the Tory plan to ensure that all MPs pay full UK tax as a "sham."

"The super rich like Lord Ashcroft, Zac Goldsmith or Labour’s Lord Paul can be fully resident for tax purposes in the UK, but if they are able to opt for non-dom status they will not pay a penny in UK tax on their main fortune outside Britain," Huhne stated.

"The only reason David Cameron is putting forward this plan now is because of the revelation that his high-profile candidate, Zac Goldsmith, has avoided an estimated GBP5.8 million in British taxes over the last ten years," Huhne claimed.

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