Lord Digby Jones, the Trade and Industry Minister has said that Government plans to tax non-domiciles could damage London's top position in global finance, saying it could discourage top investors and business people from coming to the capital.
The Government currently has plans to charge Â£30,000 per year to foreigners who claim tax exempt status on their overseas earnings for more than seven years.
Lord Jones has said that people have asked him about the current plans when he is on foreign trips.
In an interview with Financial Times, Lord Jones said, It has caused people to say 'Does this mean you don't want us?',
The proposals have raised concern in the City of London, where it is feared that rich investors from abroad will no longer chose to come to the UK.
According to Treasury estimates, the scheme would result in 3,000 non-domiciles leaving the country but would raise an extra Â£800 million.
The government has already managed to prevent UK investors from holding tax free funds offshore.