Britain's Super Rich Unlikely To Move To Boring' And Culturally Barren Tax Havens

19th April 2024

The vast majority of Britain's extremely wealthy people would never leave the country for tax reasons, partly due to the stigma involved in doing so, according to new research from the International Inequalities Institute at LSE.

Tax advantageous destinations are widely regarded by the wealthy as ‘boring' and ‘culturally barren' and tax migrants are judged on moral grounds as unduly economically self-interested. Moving to a tax haven therefore constitutes a perceived reputational risk, the study found.

Researchers Professor Sam Friedman, Victoria Gronwald, Dr Andy Summers and Dr Emma Taylor conducted in-depth interviews with 35 people in Britain's top one per cent of income and/or wealth. They found that none were currently planning to migrate out of the UK for tax reasons or were actively considering tax migration in the future. The sample was politically balanced to include individuals who lean both to the left and the right on issues of tax policy and wealth redistribution.

Typical interviewee responses included:

"What puts me off it is that I have a nice life here (in London), you know. My clients who moved to the Bahamas were bored to death. Sun, sea and sand. Okay, it's great for a couple of weeks to charge the batteries but after a while you think, well, I'd quite like to go and watch an opera, well, you can forget that, there's not a theatre in the Bahamas." (Luke, 50s, law)

"I wouldn't go to a tax haven. Can you imagine anything worse than going to a tax haven? Some tiny little place with just people with yachts and servants. So no, I wouldn't leave for that kind of reason. I mean I do despair of, I mean I want to live in a vibrant economic climate where there's room for innovation and you know people are inventing and I think London is like that." (Leanne, 60s, consulting)

However, many were concerned that top tax rates in the UK were currently too high and would rise further. A minority of interviewees said they would not rule out tax migration but only if the political and economic conditions in Britain changed dramatically. A return to top tax rates seen in the 1970s or a Jeremy Corbyn-style government were frequently cited as ‘red-line' conditions.

Interviewees based in London revealed that the most important factor underpinning their reluctance to migrate was their attachment to the capital's unparalleled cultural infrastructure, private health services and private schools, along with the ability to maintain key social ties.

There was also general concern about career risks, administrative burden and familial upheaval, along with a strong attachment to British culture and values.

Interviewees were sceptical about the prevalence of tax migration in the UK, despite persistent media narratives that policymakers have to limit tax increases to avoid large numbers of wealthy individuals leaving. Most acknowledged that tax was a factor in decisions they and their wealthy or high earning colleagues and friends made about where to live, but this was rarely decisive. The report follows earlier research from LSE using tax data, which showed that previous reforms to the non-dom tax status only resulted in modest increases in emigration by those affected.

The paper concludes: "These findings pose an important question: why do they stand in such stark contrast to the prevailing media narrative that ‘the rich are fleeing Britain' to escape taxes?

"We suggest two main reasons. First, the wealthy voices spotlighted in the media are typically highly selected. Sometimes this is because those interviewed are already known to be outspoken about tax, but more often it is because their perspective has been provided second-hand by tax advisors and other wealth management professionals.

"Second, media reports into migration by the wealthy often appear in the political context of pro-posed tax rises, where wealthy interviewees may have a vested interest in threatening migration or at least foregrounding tax as a factor in their decision."

Sam Friedman, Professor of Sociology at LSE, commented: "We need to challenge the prevailing assumption that if you tax the rich, they will leave. The rich are not only strongly embedded but they’re also acutely aware of the stigma of tax migration - of being seen as unduly self-interested or moving to places others consider culturally barren and boring."

Emma Taylor, Visiting Fellow at LSE’s International Inequalities Institute (III), said: "Place matters when it comes to the wealthy. London offers an unparalleled form of cultural infrastructure to which the rich are very firmly attached."

Victoria Gronwald, Researcher at LSE III, observed: "Politicians should think more about how to make the UK attractive to high income earners and wealth-holders in terms of general quality of life and health, education and cultural infrastructure, rather than missing out on important public revenue by protecting them from new or higher taxes."

Authors
London School of Economics
Researchers Professor Sam Friedman, Victoria Gronwald, Dr Andy Summers and Dr Emma Taylor.

Read the full report HERE
Pdf 21 Pages.

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