{"id":490506,"date":"2025-10-11T08:14:11","date_gmt":"2025-10-11T08:14:11","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/490506\/"},"modified":"2025-10-11T08:14:11","modified_gmt":"2025-10-11T08:14:11","slug":"could-we-have-stopped-revoluts-founder-from-leaving-the-uk","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/490506\/","title":{"rendered":"Could we have stopped Revolut\u2019s founder from leaving the UK?"},"content":{"rendered":"

Nik Storonsky, the billionaire founder of Revolut, has reportedly left the UK and become tax resident in Dubai \u2013 a move that could save him more than \u00a33 billion in UK capital gains tax. His departure raises a larger question for the UK tax system: could we have stopped him leaving? Either with the carrot of a more competitive tax system, or the stick of an exit tax? <\/p>\n

The \u00a33bn exit<\/p>\n

As reported<\/a>, Nik Storonsky, the founder of Revolut, updated a Companies House entry<\/a> to show his residence shifting from the UK to the United Arab Emirates.<\/p>\n

Revolut is expected to list<\/a> in the near future, with the most recent funding round suggesting its market capitalisation would be around \u00a355bn<\/a>. Mr Storonsky owns about 25% of the business<\/a> \u2013 so his stake is worth about \u00a314bn (and potentially more under an incentive deal<\/a> if the value of the business grows significantly).<\/p>\n

If he\u2019d remained UK resident then he would have been taxed at 24% on his capital gain when\/if he sold shares \u2013 with a CGT liability of up to \u00a33.4bn if he sold them all. To put this in context, that\u2019s about a quarter<\/a> of the UK\u2019s total capital gains tax revenue in any one year.<\/p>\n

Mr Storonsky would also have paid UK income tax at the dividend rate of 39.35% on dividends on his shares.<\/p>\n

The UAE has no capital gains tax or income tax<\/a>. So Mr Storonsky has plausibly saved over \u00a33bn by leaving the UK.<\/p>\n

The question is how we should think about this, and whether we should change our tax policy \u2013 either reducing tax to convince people like Mr Storonsky to stay, or creating exit taxes to make it more expensive for them to leave.<\/p>\n

There are at least three different ways to view this \u2013 but no easy answers:<\/p>\n

1. This shows the UK is not competitive<\/p>\n

In a very real sense this is true. For someone expecting to make a large capital gain, or receive a large amount in dividends, the UK is completely uncompetitive against the UAE and other countries that have zero capital gains tax and\/or zero income tax. <\/p>\n

This is, however, a proposition that only a small island or an oil-rich city-state<\/a> like Dubai can offer. No large developed economy has zero income tax or zero CGT \u2013 it can\u2019t be done.<\/p>\n

Merely cutting our income and CGT wouldn\u2019t change the dynamic \u2013 we\u2019d have to match (or almost match) the UAE\u2019s proposition.<\/p>\n

Could the UK abolish CGT?<\/p>\n

Capital gains tax is expected to raise \u00a320bn in 2027\/28<\/a> \u2013 a substantial sum. There would undoubtedly be dynamic effects from abolishing the tax \u2013 abolition would cost less than \u00a320bn, as increased economic activity caused additional revenue from other taxes. <\/p>\n

In the short term these effects would be very large<\/a>, as people who\u2019d sat on assets with large unrealised gains took the opportunity to dispose of them. However the evidence suggests<\/a> that there would be very limited positive effects beyond this. <\/p>\n

The key reason is that UK assets are mostly held by institutional and foreign investors who aren\u2019t subject to UK CGT. The wealthy generally diversify their holdings, and so only a small proportion of their assets will be UK assets. This puts a low cap on the ability, even in principle, of capital gains tax policy to materially impact the UK economy.1<\/a> <\/p>\n

Another reason: the rate of capital gains tax is too low to have large incentive effects. If the rate of capital gains tax was 98% (say) then very high then a rate cut absolutely would pay for itself, but a rate of 24% means that is very unlikely<\/a>.<\/p>\n

So there\u2019s limited upside. There is, however, a considerable downside to abolishing capital gains tax, aside from the c\u00a320bn of immediately lost revenue. <\/p>\n

Without CGT, people have a huge incentive to avoid tax by shifting what is really income into capital gains. The Beatles did it in the 1960s<\/a>. The wealthy continued to do it in the 1970s (which is one reason why those apparently high 98% income tax rates in fact raised little<\/a>). Private equity firms do it today<\/a>. There\u2019s lots of evidence<\/a> that changes to CGT rates exacerbate these effects, and CenTax has plausibly estimated<\/a> that abolishing CGT would reduce income tax revenues by between \u00a33bn and \u00a312bn.<\/p>\n

Many economists<\/a> therefore believe that capital gains taxes shouldn\u2019t exist in principle, but have to exist in practice to protect income tax. <\/p>\n

Those (non-tax haven) countries that don\u2019t have a capital gains tax usually defend against the potential loss of income tax by creating a series of special rules that realistically amount to a rather messy and complex capital gains tax. A New Zealand law firm has written a helpful explanation of the New Zealand approach, and the title says it all: \u201cJust admit it already New Zealand, we do have capital gains taxes<\/a>\u201c.<\/p>\n

The \u201ccompetitiveness\u201d argument is, therefore, not coherent \u2013 eliminating capital gains tax would cost c\u00a325bn \u2013 about 1% of GDP, with little upside. <\/p>\n

That\u2019s not to say there aren\u2019t other things we can do to make our capital gains tax system encourage investment<\/a>. We could stop taxing illusory inflationary gains<\/a>. We could end the anomalous and unprincipled prohibition on deducting capital losses from ordinary income.2<\/a><\/p>\n

There are also other ways we could change the tax system to encourage investment; we could abolish stamp duty on shares<\/a>. We could reform corporation tax<\/a>. We could abolish business rates and stamp duty land tax and replace them with a modern land value tax<\/a>.<\/p>\n

However it\u2019s doubtful that any of these would have persuaded Mr Storonsky to stay in the UK \u2013 none of them would have materially changed his \u00a33bn capital gains tax bill \u2013 indeed the most realistic CGT reform<\/a> would increase it.. <\/p>\n

Even if we reduced CGT to 5% (likely at an overall cost of \u00a320bn+), migration would still have saved Mr Storonsky \u00a3600m of tax. I suspect most people would migrate to save \u00a3600m.<\/p>\n

We can\u2019t compete with the UAE.<\/p>\n

2. This shows we should change the law and tax exits<\/p>\n

This argument goes: it\u2019s unfair that someone can build a valuable business in the UK, leave the UK, and then never pay tax on what is (realistically) remuneration for their work during the time they spent in the UK. \u201cUnfair\u201d both from a vertical equity standpoint (why should Mr Storonsky pay less tax on billions than a cleaner pays on minimum wage) and a horizontal equity standpoint (why should Mr Storonsky pay less tax than someone in an identical position who chooses to remain in the UK?).<\/p>\n

It also seems undesirable for the UK to have a tax system that actively encourages wealthy people to leave.3<\/a><\/p>\n

Many countries try to prevent these outcomes with \u201cexit taxes\u201d.<\/p>\n

Typically how this works is that, if you leave the country, the tax rules deem you to sell your assets now, and if there\u2019s a gain then you pay tax immediately (not when you later come to sell). Often you can defer the tax until a future point when you actually sell the assets or receive a dividend.4<\/a> And if your new home taxes your eventual sale, then your original country will normally credit that tax against your exit tax. Actual implementation is (inevitably) more complicated, but today almost every large developed country in the world5<\/a> has an exit tax:<\/p>\n