They are overpaid and over here. Alistair Darling's squirm is all-too visible as he juggles with the hot plates - Britain's rampaging money-go-round economy in one hand and the nation's angry middle classes in the other. They push up house prices in nice neighbourhoods to levels we cannot afford, these non-domiciled plutocrats. Their over-achieving kids crowd our children out of the best private schools.

No one is yet citing the third libidinous excess that was attributed to non-domiciled Yankee troops during the Second World War. Today's non-doms are overtired, it seems, and not a threat to our manhood.

It's an inglorious spectacle - Labour and Tories exploiting class hatred. Non-doms are the aristocrats of new Britain, living high on the hog and on the backs of the toiling bourgeoisie, like the bewigged and perfumed grotesques of pre-revolutionary France. Meanwhile, a much larger group of foreigners, our former colonial servants, are hated for different reasons - scrounging, incapable and dangerous. It's a potent political brew - envy of the rich laced with contempt for the poor and hopeless. It wins votes, but will it bring more money to London, the world's favourite offshore financial centre?

Forget these non-doms. They don't consume public services; their worst offence is vulgarity. It's the other non-doms that matter, the ones that shelter behind a corporate veil. Companies are mobile, to a much greater extent than was understood by Jim Callaghan when, as Chancellor, he introduced corporation tax in 1965. More importantly, a corporation can do things that a human being can only dream of.

If you were a company, you could be in several places at once. You could be making things cheaply in a Chinese sweatshop and collecting tax-free dividends in a corporate headquarters in Amsterdam while at the same time lavishing hospitality on your customers in Paris, France being a jurisdiction that understands the importance of deductions for business entertainment.

Lawyers invented domicile because residence is fickle. The law hankers after fixing legal permanence to things it wants to prosecute, sue or tax. Hence, America taxes its citizens wherever they are in the world, but Britain taxes residents and, in an attempt to attract wealthy private investors, it offers a concession over non-UK income to those who claim a permanent link to somewhere else.

Yet Britain, unlike other countries, offers few such concessions to companies. Foreign multinationals would like to use London as a base for their global wheeling and dealing and London would love to have them. The competition to attract big corporates is fierce. Britain once led the pack, but Ireland has adopted a 13 per cent rate and, in an effort to catch up, Britain will cut its corporation tax rate to 28 per cent in April. It's not enough, because the Netherlands has responded by cutting its rate to 25 per cent.

It's a race to the bottom, one that the Treasury cannot win. The Netherlands, Luxembourg, Ireland and many Swiss cantons already offer fiscal regimes to foreign holding companies that are virtually tax-free. Establish a foreign headquarters in Amsterdam and you can receive dividends from abroad tax-free and remit profits to a foreign parent tax-free. Zurich offers similar attractions.

Consider Royal Dutch Shell: when the oil multinational merged its British and Dutch parents, it established a combined company that was British-registered - Royal Dutch Shell plc - but with a headquarters in The Hague. Shell is technically British, but for tax purposes it is resident in the Netherlands. In June, the Treasury considered the matter and tinkered, but offered no real concession. Revenues from corporation tax are too big, about £50billion and HM Revenue & Customs fears that it will lose more than it would gain by following the Dutch model.

It's a flimsy answer to a bigger question. What is Britain's future: in services or in manufacturing? What is the Ultimate Selling Proposition of UK plc? The non-doms, human and corporate, want an answer. Mr Darling's wriggle is not good enough.

carl.mortished@thetimes.co.uk

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