“Tax land” from the banks of the “Silvery Tay”

Given that I am working in Dundee this week this seems like the best place to start.  Dundee is also my favourite Scottish city.  The plans for the town centre and the waterfront are very impressive.

So why is Dundee in the news this week?  Scottish Finance secretary John Swinney named a series of “hubs” where incentives will be offered to companies in manufacturing, life sciences and low carbon renewable energy.   The ports of Dundee and Leith is one of two low carbon and renewables areas proposed.   A number of questions remain to be answered including what are these “incentives”.  For example a reduction in business rates?  The announcement from the Scottish Government can be found here.

Also on business rates. The Scottish Chambers of Commerce called for the planned rise in business rates to be reconsidered.  The rate is planned to rise by 5.6% in April with the figure based on last September’s inflation rate.  This week saw the CPI rate of inflation fall to 4.2%.

Now to the UK Budget scheduled for 21 March.  The games have begun and the Deputy PM seems to have got his retalation in first.  Nick Clegg is purported to be urging the Chancellor to include a “mansion tax” on homes worth £2m and measures to stop the avoidance of stamp duty land tax on the sale of high value residential properties.  Will Nick Clegg get his two wishes?  The mansion tax is a long shot.  I cannot remember one Conservative politician saying anything positive about that proposal.  Further measures on stamp duty land tax avoidance is much more likely to be included in the UK Budget.

Further evidence of the tension within the UK coalition on taxation matters is shown by this comment by Lord Oakeshott of Seagrove Bay, a Liberal Democrat peer and close ally of the Business Secretary Vince Cable:  “A mansion tax is the real test of whether the Coalition means business on fair taxation. You can’t claim ‘we are all in it together’ when wealth is virtually untaxed.”

This week also saw author Ian Rankin calling for tax incentives to support new writers.  Rankin said that the UK should adopt a scheme similar to the one already in existance in Ireland.  Under the Irish scheme the first 40,000 euros, roughly £33,000, of annual income earned by writers, composers or visual artists from the sale of their work is exempt from tax.  There have been similar calls for this type of exemption in the past.   Likelihood of success?  The response from the HM Treasury does not leave much wiggle room.

A spokeswoman for the HM Treasury said:  “Any new relief adds complexity to the tax system and could come at considerable cost to the Exchequer at a time when the government’s priority is rebalancing the economy.”  The full article from BBC News website can be found here.

Now to the comments made this week by Ed Miliband leader of Her Majesty’s Opposition.  Milliband would like the Crown Dependencies of Jersey, Guernsey and the Isle of Man to be persecuted as “tax havens”.   For persecution read tougher European Union action.   Milliband is urging the UK Government to force the Crown Dependencies to reveal the names of wealthy UK investors who use tax planning.  If they do not cooperate they would be threatened with being put on the OECD’s (Organisation for Economic Co-operation and Development) blacklist.

This policy might could be included in Labour’s 2015 election manifesto.  Not surprisingly the Crown Dependencies have hit back.   This is from Guernsey’s treasury and resources minister Charles Parkinson:  This is “political posturing by a Labour leader who is struggling in the opinion polls”.  This is an issue that will surface again and again and could eventually result in increased calls for a change in their relationship with both the Crown and the UK.

Now to the fiscal powers debate.  I have for many years suggested that those arguing for fiscal autonomy for Scotland should look to the Isle of Man for some pointers.  That suggestion is as valid as ever as in less than two generations the Isle of Man has achieved almost complete fiscal autonomy.

Also on the fiscal powers debate.  As I have discussed before if you devolve tax and fiscal powers to one part of the UK that might mean tax competition.  How might other parts of the UK react to this?  We have already seen how Northern Ireland has reacted to even the possibility of the Scottish Parliament receiving similar powers over corporation tax.

Another and possibly more interesting example arose this week.  The Scotsman reported that the campaign to gain control of air passenger duty has been undermined by fierce lobbying from regional airports in the north east of England.   The claim is that it would damage their competitiveness.  It seems that the English regions are at last waking up.

I also read with great interest this week that a professional tax adviser has been convicted of a £70m tax fraud that involved donating shares to charities at many times their true value and collecting Gift Aid on the donations.  Yes £70m.  He will be sentenced on 9 February.  I think he should take his toothbrush to the hearing.

I will finish on a statement made by HMRC this week:  “We accept that our service standards last year were unacceptable but all the evidence is that we are turning the corner. “What caught my eye were the words “all the evidence”.  I suspect that I and many others will look at this claim throughout the coming year.

Have a good weekend.






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