Scrapping the non-dom tax regime could cost the UK £6.5bn and 23,000 jobs in the next ten years, a think tank has claimed in a report whose findings were questioned by leading academics.

The study, published by free market think tank the Adam Smith Institute (ASI), suggests that abolishing the special status for wealthy foreigners would lead to over a quarter of non-doms leaving the UK, triggering a steep reduction in tax take, investment and wealth creation.

The ASI, whose patrons include former Chancellor Nadhim Zahawi and ex-Conservative Party chair Brandon Lewis, recommends the government introduces a flat tax of £150,000, similar to the one in place in Italy, to stop the exodus of foreign residents from Britain.

The paper’s authors claim their scheme would generate massive £12.5bn a year in tax revenues for the exchequer, the study’s authors claim, assuming every non-dom in the UK opted into it.

But the £12.5bn figure was disputed by two leading academics whose work focuses on high net worth taxation.

Arun Advani, associate professor at the University of Warwick told City AM: “The numbers here just don’t add up. Currently less than 2,500 people are willing to pay £30-60k to access the regime [that is in place now], so you’d need all of them to be willing to pay £5 million a year to reach £12.5bn. 

“The vast majority of non-doms are working in high-paying jobs in the UK, not sitting on piles of offshore cash. A flat tax of £150,000 wouldn’t help them at all.”

And Andy Summers, associate professor at London School of Economics, added: “This report is trying to resurrect the zombie idea of a flat tax, already proposed by ex-Chancellor Nadhim Zahawi ahead of the March Budget. The Treasury rejected it then, and I’d expect them to do so again, for the simple reason that it can’t raise anything like the sums that the authors have claimed.”

Taxing wealthy foreign residents has become a contentious topic in recent weeks, after reports suggested Rachel Reeves was considering watering down previous measures to tax the highly mobile community more aggressively.

Labour had claimed it would raise up to £3bn by ‘scrapping the unfair non-dom status’ in its manifesto before the election, including a controversial move to apply inheritance tax on assets held in a foreign trust.

But after panicked warnings from a slew of tax advisers and family office managers of a ultra rich exodus, readings from the Office For Budget Responsibility (OBR) that warned the plans might lose the exchequer tax revenues were said to have prompted the chancellor to re-evaluate the move.

The ASI’s paper comes just days after non-dom lobby group Foreign Investors for Britain unveiled a separate proposal on how to tax wealthy foreign residents, called a Tiered Tax Regime (TTR).

Under the plan, which foreign UK residents would would be able to opt into, those with a net wealth under £100m would pay an annual charge of £200,000. Non-doms worth between £100m and £250m would pay £500,000 in the second band. And those that would fall in the top band – with over £500m in net assets – would pay £2m a year.

Leslie MacLeod Miller, chief executive of FIFB, which met with No 10 officials on Thursday to discuss its proposal, said: “[The ASI’s] research underscores the importance of keeping the UK attractive to high-net-worth individuals, especially in an increasingly competitive global environment.

“While we support ASI’s call for urgent action, we believe our solution of a Tiered Tax Regime (TTR) presents a more balanced solution.

“Backed by extensive and independent research from Oxford Economics having surveyed one of the largest cohorts of non-doms and non-dom advisers, the TTR would offer targeted incentives that retain and encourage foreign investors, while ensuring they contribute fairly to the UK economy.

“We urge the Chancellor to consider these proposals alongside ASI’s recommendations to protect the UK’s position as a global leader in attracting wealth and investment.”

City AM understands that initial results of the group’s modelling – which is still being carried out by Oxford Economics – suggest the amount raised by its more proposal is in the low billions, considerably lower than ASI’s findings, despite taxing people at a considerably higher rate.