Firstly to Belarus and Tax Information Exchange Agreements.  It was reported in this month’s STEP Journal that Belarusian human rights campaigner Ales Belyatsky has been arrested.  He was arrested soon after the Polish authorities gave the Belarusian authorities information relating to his bank accounts.   The Belarusian authorities had described him as a suspect in a tax investigation.  The Poles treated this as a routine request and handed over full details of his bank accounts.  He has been charged with tax evasion via a foreign bank account.  Belyatsky says the foreign bank account is used only to collect foreign contributions to his political movement.  The Polish Government has admitted it should not have disclosed Belyatsky’s bank details and has sacked the director and deputy head of its international cooperation department.

HMRC announced this week that approximately six million people are set to receive tax rebates averaging £400.  Another million people will learn they have underpaid their tax by about £600.  It is the second year that tax and National Insurance discrepancies have been identified by a new computer system.  HMRC said that the number of cases would reduce “as the new system beds in”.  Those who will be told they have not paid enough tax are expected to owe between £500 and £600 on average.  In a similar exercise last year, HMRC were criticised for being insensitive over their treatment of underpayers.  Another example of the complexity surrounding the UK tax system.

The Scottish Government announced a consultation on giving local authorities new powers to tax empty homes. The proposals would give local authorities the power to impose an extra levy of up to 100% of the standard charge. It is hoped that this could help raise millions of pounds to build new affordable houses.  The announcement stated that 25,000 properties have been empty for more than six months and are liable to pay council tax.  In Glasgow there are over 1,800 empty homes.  It is also claimed that if every local authority decide to use these powers they could raise up to £30 million per year.  I wrote about the connected issue of how local authorities are using funds gained from reducing the council tax discount in an earlier tax blog.  This blog can be found here.

This is something I have not come across before.  The Intergenerational Foundation called for tax breaks to encourage downsizing and help free up some of the estimated 25 million unused bedrooms in England.  The charity says that older people should be encouraged to move into smaller homes to help tackle England’s housing crisis.  The UK Government did not respond positively to this proposal.

Both sides in the battle over what independent schools have to do to justify their charitable status claimed victory last week.  The Independent Schools Council and the England and Wales Charity Commission are each claiming that the decision of the Upper Tax Tribunal vindicates their position. A similar debate is taking place in Scotland.  The tax issue here is the fact charities have a number of tax advantages including rates relief.

Now to the fiscal powers debate. Interesting to see Malcolm Chisholm MSP openly reject the Calman proposals. His comments mirror views recently expressed by former First Minister Henry McLeish.  Malcolm Chisholm is the first serving Labour MSP to openly reject the Calman proposals. The Scottish Government has renewed its call for control over Air Passenger Duty after the UK Government cut air passenger duty for Northern Ireland.  I also suspect that the Scotland Bill may be mentioned once or twice at the SNP conference which began yesterday.  The announcement that North Sea oil production will continue to at least 2050 ensures that oil and gas tax revenue is back at the top of the political agenda.

I have been asked to speak at Holyrood Magazine’s Scotland Bill conference on 8 November.  More information can be found here.  I can already hear myself saying: “does Scotland need a separate Registers of Scotland, Stamp Office, Companies House and Inheritance Tax office? Then again I have been making that point for 5 years now and no-one seems to be listening.

Have a good weekend.

Firstly to Australia.  Australia’s House of Representatives has narrowly voted in favour of the Clean Energy Bill.  The Bill was passed by 74 votes to 72.   The tax will be introduced on 1 July next year.  The Australian Government plans to tax the carbon pollution caused by the burning of fossil fuels including coal and petroleum.   The closeness of the vote and George Osborne’s comments at his party conference show how far the carbon tax debate has still to run.

Rafael Nadal has defended his decision not to compete next year at the traditional pre-Wimbledon warm up at Queens.  It was also recently reported that Usain Bolt is not going to compete in the UK before the London Olympics.   They each claim that if they compete they would be out of pocket due to UK tax rules.  Under UK tax rules foreign sports stars are taxed on a proportion of their entire global income rather than the just the money they earn in the UK.

The UK Government shows no sign of changing these rules although it is worth remembering that a concession was made for the 2010 Champuons League final at Wembley.  The concession, announced in the 2010 budget was a key condition laid down by UEFA for staging the final.  A similar concession is in place for next year’s Olympics.  What though of the 2014 Commonwealth Games in Glasgow?

More bad publicity for HMRC.  Dave Hartnett, permanent secretary for tax at HMRC is facing demands to quit after being accused of lying over a deal that spared Goldman Sachs a multimillion pound tax bill for its bankers’ bonuses. The article from the Independent can be found here.

The most interesting fiscal powers announcement this week comes from Wales.   The Secretary of State for Wales, Cheryl Gillian has announced the composition of a commission to assess the way that Wales is funded.  This could result in the Welsh Assembly being granted borrowing and tax raising powers.   The Commission will be led by Paul Silk, a former clerk to the Welsh Assembly.  The fact that I have mentioned Wales gives me the chance to wish them all the best tomorrow.

The announcement that BP is to to go ahead with a £4.5bn project off Shetland re-ignited the debate over the UK Government’s recent decision to raise the supplementary tax on North Sea oil production from 20% to 32%.  Claim and counterclaim over how much oil is left or whose oil this is will no doubt continue in the run up to the independence referendum.  The amount of coverage that this announcement received shows how important the oil industry is to the UK economy and in particular the tax take for the UK Treasury.

And finally, a little bit of good news from Europe.  The European Commission has published a report showing that EU member states’ tax revenues are rising again after a marked fall in 2008 and 2009.

Have a good weekend.

Tax stories from all four home nations and Denmark this week.

I will though start with some facts and figures.  It was reported this week that the average pensioner household paid £5,124 in tax over the past year.  That means the average UK pensioner household pays out 27% of its income to HMRC.  That is a combination of direct and indirect taxes which add up to an annual tax bill of more than £34 billion.   Further evidence of how large a contribution this age group contributes to national and local government finances.

Now to Wales and the Welsh Government’s introduction of a plastic bag tax.   Anyone who wants a plastic container to carry their shopping in will need to pay a 5p levy for the privilege.  They will also need to pay for plastic packaging for fast food items.

Staying with fast food but moving to Denmark.  Denmark has introduced what is believed to be the world’s first “fat tax”.  They have introduced a surcharge on foods that are high in saturated fat.  Butter, milk, cheese, pizza, meat, oil and processed food are now subject to the tax if they contain more than 2.3% saturated fat.  The UK Government are also considering such a tax the Scottish Government are not.  The  Scottish Government plans to work with manufacturers instead.

Now to Edinburgh and the latest local politician to suggest a tax change.   This time it is Colin Keir SNP MSP for Edinburgh Western.  His idea is to cut VAT rates for the tourism and golf services industry and as presently happens in Ireland.

There were this week a number of interesting announcements on additional tax powers for the Scottish Parliament.  The Scottish Government has called for the revenue from alcohol duty to be devolved to Scotland.  That makes sense when you consider that health is already devolved.  What though of tobacco duty?  Also why is the Scottish Government simply asking for this revenue to be assigned to it but not the power to vary duty rates or control over the underlying law?  I suspect that this “request” will receive the same reaction from the UK Government as the call for control of corporation tax and the Crown Estate.

More interesting was the call from a group of newly elected Tory MPs for the Scottish Parliament to have full tax raising powers in a book billed as the way forward for the Conservative Party.

Mixed news for Northern Ireland on fiscal powers this week.  Looks as if it will be given some Air Passenger Duty powers but that the devolving of some restricted powers over corporation tax will be at best delayed.

Few surprises at the Tory conference.   George Osborne confirms the English Council tax freeze and that there will be no temporary tax cuts.  This almost certainly means no change to the 50p rate of income tax or VAT.   The Tories also confirmed their opposition to a European Union financial transactions tax.  Iain Duncan Smith did though go off message when he called for breaks for the poor and married couples.

For those interested in the Scotland Bill I would recommend that you look out for coverage of the evidence given to the Scotland Bill committee by Martin Sime of the SCVO.

The premise of the evidence is that the Scotland Bill will be irrelevant before it is implemented.  I have blogged on this issue before but from a tax perspective.

The Scotland Bill includes an income tax proposal that is overly complicated.  In addition the Scotland Bill fails to link up devolved responsibilities such as the environment with associated environmental taxes.  Or health and alcohol and tobacco duties.  Or succession law and inheritance tax.  Or giving OSCR sole responsibility for charity registration.  Devolving these and other similar taxes and duties, and certain specific tax powers, would have given the Scottish Parliament a greater number and more wide-ranging set of economic levers.   It would also simplify government both in Scotland and the rest of the UK.

More information on the evidence to be given by SCVO can be found here.

No shortage of matters to blog about this week.

I think I will start with Edinburgh and in particular the City of Edinburgh Council.  Last week a “hotel bed” tax was proposed by Jenny Dawe leader of the Council.  This idea has been recycled a number of times over the last few years.  This week she proposed a voluntary “festival ticket” tax.  Clearly the Council are turning their minds to how they might meet any future funding shortfall.  Not yet clear if this is just kite flying by Councillor Dawe or whether there is serious support for one or both of these ideas.  I do though like the fact that a local politician is willing to enter into this sort of debate.

Moving on to the Scottish Parliament and John Swinney’s latest Spending Review.  Business rates have dominated the coverage of the Spending Review.  There has been a public debate. For debate read “slanging match”, between the Scottish Government and the “Centre for Public Policy and the Regions” over how much business rates revenue is going to increase over the next few years and also what the causes of this increase will be.    This debate has surprisingly overshadowed the proposal for a new “public health levy” on the business rates of large alcohol and tobacco retailers.

Interested to see that Ken Macintosh, one of candidates for the leadership of the Scottish Labour party – and yes I can name the other candidates as well – says if elected and if he wins the next Scottish General Election he would cut the Scottish rate of income tax.  Not that we have a Scottish rate of income tax yet and it is not even certain that the Scottish Government will accept the income tax proposals contained in the Scotland Bill.  Nonetheless this is a welcome sign that that the Labour party in Scotland are joining the fiscal powers debate.

More evidence has been given this week on the Scotland Bill.  As noted by a number of commentators this week we are in the position that very few people seem happy with the fiscal and tax provisions as proposed.  Numerous questions remain over the income tax proposals.  Some minor taxes recommended for devolving by the Calman Commission have not even been included in the Bill.  One of these, Air Passenger Duty, is to be devolved to Northern Ireland.  A pattern does appear to be forming here.  Borrowing powers, corporation tax and now Air Passenger Duty.

The UK Government is unhappy with the Scottish Government.  The Scottish Government is unhappy with the UK Government and in particular the UK Treasury.  No side seems to be acknowledging how complicated all of this is.   This has “it is going to end in tears” written all over it.  I still don’t understand why so much energy is being wasted on income tax and corporation tax when there are numerous other taxes which would be much easier to devolve.  These taxes even if a majority were devolved would not provide as much revenue as income tax but would provide a greater number and a more wide-ranging set of economic levers for the Scottish Parliament.  Still I am sure our politicians know what they are doing.

One suggestion.  There are going to be two new Scottish taxes: Stamp Duty Land Tax and aggregates levy.  Can I suggest that the Scottish Government involves the Scottish Law Commission in the drafting of the legislation of these taxes.  Two reasons.  Firstly the expertise, experience and reputation of this body is second to none.  In addition, as more taxes are likely to be devolved, this will ensure that we start the job of creating an expert group going forward.  The recent Scottish Government paper on Corporation Tax shows just how much work requires to be done before such taxes can be devolved.

Now to Liverpool and the Labour party conference this week.  Ed Balls renewed his call for a cut in VAT and in particular a reduction to 5% for VAT on building repairs and renovations to residential property.   I have previously blogged on the Scottish campaign for a 5% VAT rate for repairs and renovations and in particular on the fact that the Isle of Man has already negotiated such a reduction with the UK Treasury.

Let’s not forget Europe in these troubled times.  The European Commission has now formally called for a new tax on financial transactions amongst EU members.  Note EU members not Euro members.  The UK Government has made its opposition clear to this proposal and in particular on the ground that it would primarily be a “London tax”.  Not yet seen or heard what the Scottish Government think of this proposal.

I wonder if the European Commission’s proposal will be mentioned at the UK Conservative party conference.

Interesting article in the Scotland on Sunday on HMRC’s power to inspect the tax records of small businesses.

HMRC has confirmed that it is proceeding with its programme to inspect the tax records of small businesses despite facing a barrage of criticism since a pilot was first announced in March.

The article questions whether HMRC has the power to impose a fine of up to £3,000 if  the tax records of a small business are not up to date.

I agree with the comment by Colin Borland of the Federation of Small Businesses in Scotland: “If businesses received guidance rather than fines the checks could be a positive move, but in their current form they were creating alarm among many small business.”

The article can be found here.

Yesterday saw John Swinney, Scotland’s Finance Secretary, give his first Spending Review (for Spending Review think Budget) of the first term of the new Scottish Parliament.  John Swinney made a number of tax related announcements.

The announcement that made most of the headlines was the proposal for a new public health levy.  A choice of words to be followed depending it seems on whether you agree with the proposal.  This proposal is similar to the proposal in the last Scottish Parliament that was dubbed “tesco tax”.  That proposal failed as the then Scottish Government did not have a majority.   That is of course not an issue for the present Scottish Government.   The levy will be a business rates supplement paid by large retailers of both tobacco and alcohol from April 2012.

Although not given as much publicity as the above levy, Mr Swinney also confirmed funding for the freezing of the Council Tax for the next 5 years.  It will be interesting to see how Scotland’s local authorities react to this policy in the months leading up to next May’s local elections.

A proposal that has received less attention, but nonetheless and in its own way may be just as important as the other proposals, is the commitment to introduce legislation to reform “empty property relief” from April 2013.  The aim is to support regeneration and introduce incentives to reduce empty shops in town centres.

The top rate of income tax debate continues with the first sign that the Liberal Democrats are not at one on this issue.  David Laws, former Chief Secretary to the UK Treasury albeit a short lived one, said that he saw the 50p top rate as a temporary measure.  That is the position being taken by most Conservatives on this issue.

Some good news for those proposing a fuel duty discount.  On Wednesday the UK Government said that the European Commission had agreed that rates of taxation on petrol and diesel could be reduced as proposed.   The scheme will cover the Inner and Outer Hebrides, the Northern Isles, islands in the Clyde and the Isles of Scilly.  No date has yet been set for the commencement of this scheme.  An interesting story from the BBC on reaction to this announcement can be found here.

I read with great interest of how the ex-boss of Marks and Spencer Sir Stuart Rose has said in an interview that he would be prepared to pay more than the current top rate of tax.  This follows similar statements by business leaders in other countries including France, Italy and the USA and including billionaire investor Warren Buffett.  Indeed a proposal by President Obama to increase taxes on America’s wealthiest have been dubbed the “Buffet Rule”.  I wonder how many others will follow the position taken by Sir Stuart Rose.

Two new beer duties are to be introduced by the UK Government from 1 October 2011.

More information can be found here.

I received my annotated copy of this year’s UK Finance Act this morning from the Association of Taxation Technicians.

The introduction provides further evidence of just how complicated the UK’s tax system has become notwithstanding recent simplification efforts.

The Act comprises 93 sections, 26 schedules and 398 pages.

“The added pages far exceed those that can be deleted from tax legislation as a result of the repeal of redundant relieifs …, even if one were to include the further 36 reliefs on which the [UK] Government is consulting.”

The schedule on “disguised remuneration” alone adds 69 pages.  The “bank levy” schedule adds a further 52 pages.

Time for a Scottish Exchequer?

Back to the grind!

Highlight of the week for me was the publication of Reform Scotland’s latest fiscal powers paper “Devolution Plus”.  I do though have to declare an interest as I am one of the authors of this paper.  The paper outlines a possible third option, if there are to be three options put to the Scottish people instead of a straight yes or no to independence.  The paper can be found here.

The debate over the top rate of income tax also continued.  What was interesting was the claim by the Institute for Fiscal Studies that the 50p tax rate may not raise any extra revenue for HM Treasury and could actually reduce it due to high earners using avoidance measures.   HM Treasury has already revised downwards its predictions of the amount that could be raised from the 50% rate from £7 billion a year to about £2.4 billion.

Excellent article in the Herald on Tax Increment Financing.  It appears that nearly half of Scotland’s councils have made applications to the Scottish Futures Trust for permission to pilot TIF schemes.  TIF involves mortgaging the future income from local business rates to borrow money from HM Treasury’s public works loan board.   The Scottish Government has already been working with Edinburgh, Glasgow and North Lanarkshire councils for several years to set up TIF schemes for Leith Harbour, Buchanan Galleries shopping centre and Ravenscraig.  The article can be found here.

A word of caution on TIF.  I first came across TIF when working as an attorney in Chicago.  One issue that has arisen in Chicago is that if too many TIF schemes are approved the benefits are diluted.

I find myself agreeing with the comments made by Everhseds LLP on the Institute for Fiscal Studies’ Mirrlees Review of the UK’s tax system.  The problem with such a major reform is that we are not starting with a blank sheet of paper.  Making such radical changes would require a huge amount of resources and even more political will.  Neither of which appears to be present just now.

The Scottish perspective is slightly different as we will have a sheet of paper that even if not blank at least has numerous blank spaces in it when tax and fiscal powers are devolved to the Scottish Parliament.  This is in fact an opportunity, possibly a once in a generation opportunity, to do something different.  Hopefully this is a point that those on, and those giving evidence to, the Scottish Parliament’s Scotland Bill Committee will consider.   The Eversheds comments can be found here.