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The DOMICILE problem
This is a bizarre and quaint tax problem which belongs in the bad old days of serfdom and feudal medieval rulership; something that harks back to the age of slavery where the government considered it OWNED people. Domicile is not good news for those of us who have ideas about escaping to freedom and living in a world where people's rights are respected. But let's start from the beginning and describe the rights and wrongs of it, and see what can best be done to reform the politics on this.
Firstly, residency and income tax. It is generally regarded as fair that if someone is RESIDENT in the UK (most of this review is about the UK, by the way, but some of it applies to some other countries too), then they should pay income tax. Ok, we don't like paying tax, but there is at least something "fair" about paying a sensible amount of tax towards the upkeep of a country that you actually live in. And, if it's a country that has an expensive bureaucracy to run and is waging war against other countries, then that tax rate might be quite expensive.
Now, bearing in mind that you've already paid income tax on the money, it would be reasonable to assume that you can now keep the remaining money safely. But not so in the UK. As soon as you die, the UK government's appointed tax system will try to extract 40% of the money from you. That's money which you've already paid tax on! So, you pay 40% tax on the money you make, and then when you die, they take another 40% off that. That doesn't leave a lot does it? (The first 263,000 is excluded, for what it's worth).
Obviously, unless you are poor, if you live in the UK the best thing to do is to leave, to escape, and to avoid both the inclement weather and the unfair tax system. See tax havens
This is where I think there is a finely drawn dividing line, because a country can be expected to make up laws which, however arbitrary and undemocratic, if you live in a country, it's reasonable to keep to the "house rules". What I don't accept is that you can't escape, or are not allowed to escape, or that the county can apply its laws to you even though you have already escaped and no longer live there! A country can only really sensibly apply its laws to people who live within its jurisdiction. If you live outside UK territory, you should not be the victim of UK rule. People don't belong to the government. The USA is also an offender in this extraterritoriality outrage. See Domains are not US territory
But, apparently, there IS a problem! If you are unfortunate enough to be classed as "British" then even if you leave the country and never come back, there is a worry that the UK might claim it owns you and might try to confiscate a large slice of your estate.
Principle: If you don't live in a country's jurisdiction, they should not be able to force their laws onto you.
The rule of "DOMICILE" is surely against some international treaty or other? A country pretending it owns people as if they were slaves? It has has only got away with this so far because of lack of public knowledge preventing an outcry against it.
The UK for example, which might be imagined by some to be "a free country", continued even as late as 2004 to persist in the idea of owning people by means of "domicile". What this means is if you were born in the UK and you managed to become wealthy enough to escape, then, even if you travelled the world and never returned to the UK; if you died, the UK government tax authority would claim 40% of your wealth in inheritance tax (death duties), regardless of where you lived.
In theory it is possible to leave and to escape, and to uproot everything and not leave anything behind. But even that is not enough. According to UK laws, (which shouldn't apply to you anymore now that you don't live there!), you have to establish a new domicile of choice. So, buying a property in another country, replacing your passport, making sure you've not got a grave bought in the old country, etc. However, if you leave this new place and move on, your "domicile" reverts to your "domicile of origin". This means that in effect, even if you have moved out, the UK still keeps a record on secret file, tracking where you are, and if you ever cease to be fixed to the ground somewhere, they try to claim they own you! This is discrimination against people who are of nomadic lifestyle, and prejudicial to life itself. Life is only worthwhile if you have freedom, and if the UK government imposes its rules on you internationally, there might start ideas circulating of the form of "Guy Fawkes was Right!" etc, (thought of course that's not strictly accurate historically, it is a sentiment shared by many people who oppose government oppression).
Simply, "domicile" and "domicile of origin" means that the government owns you, in a kind of hangover from the days when slavery was still regarded as acceptable.
It's like an imaginary piece of string by which the slave owner may pull the slave back.
It must be embarrassing for a modern-day government regime to be caught out behaving like this. Ultimately, people have rights, and these rights include being able to be free of their place of birth. Governments that don't respect these rights have a credibility problem in public relations internationally.
Note: If you're an expert in the field of TAX, you may be able to advise me that there is some way we can buy ourselves out of slavery and buy our own freedom, ultimately escaping from the domicile problem.
Reform: A country need not hang on to its feudal laws indefinitely. It could reform. The UK has already been made to give up slavery of black people, and has been made to give up on disallowing women to vote, and factions of government have been more recently kicked out because of trying to impose poll tax and/or identity cards, so it may be that ultimately the country will give up on applying "domicile" rules upon people who do not live within its jurisdiction.
The UK is only one example of a country that has this kind of problem with accepting human rights and basic freedoms. Some countries are better and some are worse. The US, for example, tries to levy income tax on US citizens who don't live in the USA! So, not much liberty there.
Philosophical definition: What "domicile" is supposed to mean is "home" in the sense of "where someone belongs". This is a matter of lifestyle choice for each person to make by their own free will. It's not something authoritarian regimes can impose on you.
Other relevant references: Tax Havens, Tax Avoidance, Libertarian Freedom, Human Rights, and Financial Resources
Special International Diplomacy note: If the UK reforms its policy on the "domicile" issue, I am happy to alter this page to reflect such reforms. As an expatriate, I'd prefer to be an unofficial ambassador of the UK and be good for PR rather than being a critic of the country because it doesn't respect my human rights.
Reviewed by Zyra, now living in Panama