The balance between taxation and innovation

I saw a fascinating pair of columns on City AM last week. One was advocating London as the UK fintech unicorn centre of Europe:

London named Europe's 'unicorn capital' for fintechs

... whilst the other claimed the new UK Labour government policies were scaring fintech founders out of the UK and into Europe, in this case Italy:

Labour's non-dom tax raid forces Castle-owning fintech founder out of the UK

Political policies are hard but the issue is that an awful lot of fintech founders, based in London, came from overseas and the UK needs to keep them here. The latest policies however are driving them overseas.

Since the government removed the benefits of what is called non-dom status – a UK resident whose permanent home (domicile) is outside the UK for tax purposes, there’s been a flood of people leaving.

According to figures from analytics firm New World Wealth, 10,800 people with over $1 million in liquid assets left the UK last year, the highest number ever and a 157 per cent increase on the number of high-net-worth departures in 2023. That’s quite worrying.

Catching up with one of them City AM reports that reality television star Ann Kaplan Mulholland, who starred in Real Housewives of Toronto and is the founder of several businesses, including small loans specialist IFinance, joins a wave of millionaires and billionaires leaving the UK.

Kaplan Mulholland says: “We can’t stay we have too many businesses worldwide, and there’s no way we’re paying inheritance tax or having our kids taxed – that’s a lot of money.” Her solution is to move to Italy which has a flat tax residence scheme for wealthy foreigners of charging €200,000 a year for foreigners to keep their assets and income offshore and outside of the country’s revenue services. Ciao, bene.

It does make you wonder what this means longer term when Revolut and Monzo are talking IPOs in the USA and others, like Ann, are looking to move elsewhere in Europe.

In the other report on City AM, for example, they glow in the light of the European “unicorn and soonicorn report”, which shines a light on the fact that the UK and Ireland produced the most valuable unicorns in Europe, making up 38 per cent of the continent’s entire unicorn value. This is due to “the UK’s well established banking infrastructure, deep talent pool, and regulatory framework”, according to Rupert Hoogewerf, Chairman and Chief Researcher at Hurun.

The balance is those varied factors of finance, capital, investment, regulations, people, talent and support. No political commentary from me, but it does appear that the latest Labour budget is likely to damage the UK economy and fintech sector in particular. Watch this space.