My first tax and fiscal powers blog of the year.

Let’s start with the fiscal powers debate.  I thought it was interesting but not surprising to see that Jim Gallagher has joined the “NO” campaign.  Anyone who was involved with the Calman Commission, which he played an integral part in, knows his views on devolving substantial tax and welfare powers to the Scottish Parliament.  I suspect the ‘NO’ campaign were disappointed that it was his previous comments on Scotland’s European Union membership that received the most publicity and not the fact he has joined the ‘NO’ campaign.  More on this can be found here.

Now to tax powers already held by the Scottish Parliament.

John Swinney has presented his final Budget before the independence referendum.  On business rates he announced: “£77m over two years to further enhance the competitiveness of the Scotland’s business rates regime”.  More on this can be found here and here.  The Scottish Government’s policy of a freeze on Council Tax bills continues to spark debate.  The differing views of the Scottish Government and Scottish Labour can be found here.  One other and not unexpected announcement was that the Scottish Government is ending the “alcohol surcharge”.  More on this can be found here.

Now to the future.  Let’s start with the White Paper.

The Scottish Government’s White Paper can be found here.  The tax proposals can be found on pages 117 to 123.   Three of the tax related priorities are:  reduce Air Passenger Duty (APD) by 50%, set a “competitive” corporation tax rate and design a more efficient tax system.

Whilst I have no real issue with these priorities and in particular designing a more efficient Scottish tax system, I do feel that the Scottish Government is not being radical enough.  Personally I would have argued for abolishing 2 or even 3 of the minor taxes such as stamp duty on shares, APD and possibly even CGT.

Why am I arguing for this?  Firstly, if we are serious about creating a simpler and more efficient Scottish tax system we need to start removing some of the clutter.  That is best done by abolition not tinkering.   Does an independent Scotland need over 25 taxes, charges and duties?  Of course not.  Does Scotland need a separate Stamp Office, Registers of Scotland and Companies House?  Of course not.

Secondly, not only would this free up resources, it would send a clear message.  How Scotland is viewed  on independence is very important.  A clear statement of intent is needed and that should include abolishing a number of taxes.

More on the APD proposal can be found here.

Now to the Revenue Scotland and Tax Powers Bill.  The Bill provides a legal framework for the collection of taxes devolved under the Scotland Act 2012, and gives this responsibility to a new tax authority, Revenue Scotland.  In short, the beginnings of a Scottish tax system.  More on this can be found here.

I was also interested to see that HMRC plans to develop new digital services.  This is the kind of thinking those creating a Scottish tax system need to embrace.  More on this can be found here.

Now to matters slightly further afield and to some good news for the Hollande government.  The 75% top rate of tax proposal has finally been approved.  The initial proposal to tax individual incomes was ruled unconstitutional by the Constitutional Council almost exactly one year ago.  But the government modified it to make employers liable for the 75% tax on salaries exceeding 1m euros (£830,000).  More on this can be found here.

Staying with France.  The following Ernst & Young report shows the wide ranging role of France’s Constitutional Court in regard to taxation.  For example it stopped the Hollande government from widening the scope of the general anti abuse rule from ‘exclusively’ to ‘mainly tax driven’ transactions, and blocked the mandatory disclosure of tax planning schemes. The report can be found here.

Now for a bit of sport.  The European Commission is investigating whether the Spanish Government gave unfair tax reliefs to Spanish professional football clubs, including Real Madrid and Barcelona.  More on this can be found here.

The Canada Revenue Agency has published a warning to ‘snowbirds’ that it will consider them Canadian tax-resident no matter how long they spend in the US, if they maintain residential ties in Canada and do not obtain US permanent residency.  More on this can be found here.

Another interesting proposal from the Canadian Government.   They are going to pay people who inform on major international tax evasion, with pay-offs of up to 15% of the extra tax collected. More stringent monitoring of international bank transfers is also being introduced.  More on this can be found here.

And finally to China.  Documents obtained by the so-called International Consortium of Investigative Journalists from company service providers in the British Virgin Islands suggest that relatives of some of China’s governing elite have set up offshore companies.

This is from the following article: “As neither Chinese officials nor their families are required to issue public financial disclosures, citizens in the country and abroad have been left largely in the dark about the elite’s use of offshore structures which can facilitate the avoidance of tax, or moving of money overseas. Between $1tn and $4tn in untraced assets have left China since 2000, according to estimates.”

“China’s rapid economic growth is leading to a degree of internal tension within the nation, as the proceeds of the country’s newfound prosperity are not evenly divided: the country’s 100 richest men are collectively worth over $300bn, while an estimated 300m people in the country still live on less than $2 a day. The Chinese government has made efforts to crack down citizens’ movements aimed at promoting transparency or accountability among the country’s elite.”

Twas ever thus.  More on this can be found here.