Another week in “tax land”

Given it is local election time I think the level of funding for council tax benefit is an appropriate place to start.  The Scottish Government and the Convention of Scottish Local Authorities have decided to provide £40m to make up a shortfall of council tax benefit funding.  An article on this from the Scotsman can be found here.  The figure that stands out is the 558,000 people in Scotland who receive this benefit.

The Confederation of British Industry has denied that big companies are benefiting from “sweetheart deals” with the taxman.  HMRC has faced criticism over alleged secret deals with the likes of Vodafone and Goldman Sachs over unpaid tax.  The CBI briefing note is well worth reading and can be found here.

The campaign trying to make the UK Chancellor think again over the latest increase in air passenger duty continues.  The latest claim from this group of aviation and business organizations can be found here in an article on the Herald.  Part of this claim is that overseas tourists have been put off coming to the UK during the Olympics because of punitive air taxes.   The group says bookings from Australia and New Zealand are down by 25% compared to the same period in 2011.

The furore surrounding the UK Chancellor’s tax relief cap and how it might impact on charities continues.  I liked this opinion piece found on the website of the Scottish Council of Voluntary Organisations.  The piece can be found here.  Although I see the need for tax caps and/or investment limits in certain circumstances, for example under the Enterprise Investment Scheme or Venture Capital Trust relief, I would be surprised if this policy in its present form survives the summer.

It seems that mortgage lending rose sharply in March as buyers rushed to complete sales.  The stamp duty land tax exemption for first-time buyers who bought homes valued at between £125,000 and £250,000 came to an end after two years on 24 March.  The UK Government do not think that this relief has been effective in increasing first-time buyer numbers.  A report on this from the BBC news website can be found here.  I continue to be surprised that our politicians fail to campaign for a change to the 1% and 3% stamp duty land tax rates and bands.

A study by the Taxpayers’ Alliance has revealed that 3,000 council employees across the UK were paid six-figure sums in 2010-11, a rise of 13 per cent on the previous year.  The highest paid was in Glasgow where Ian Drummond, formerly executive director of special projects who has since left the post, received a £450,628 package.  Reports like this confirm the view held by some in the private sector that our local authorities completely lost the plot over senior salaries.  An article on this from the Scotsman can be found here.

Scotland appears to be moving towards charging shoppers around 5p every time they use a plastic bag.  This if often referred to as a “plastic bag tax”.  Scottish ministers have again indicated that it will consult on the matter in the near future.  Wales, Northern Ireland and the Republic of Ireland already have such a charge.  It does seem that the Scottish Government is dragging its feet on this.  A plastic bag tax was thrown out by MSPs during the last parliament when Liberal Democrat Mike Pringle tried to push through a 10p levy.  An article on this from the Daily Express can be found here.

A tax fraudster, who fled the UK four years ago after telling a judge in a note that he was unprepared to go to jail and found the idea frightening and upsetting, has been extradited from France and is beginning a six year prison term.  Mark McGovern had pled guilty to laundering £278,340.87 of criminal proceeds in April 2008, following a wider HMRC investigation into VAT fraud.  More on this can be found here.  I would have thought that most people would find the thought of being locked up frightening and/or upsetting.  Not surprisingly that is not a good enough reason to avoid being sent to prison.

New figures from the Office for National Statistics have shown that the UK Government has met its borrowing target for the year, despite borrowing more than expected in March.  An article on this from the BBC news website can be found here.  Worryingly these figures also show that most of the cuts to public spending have yet to be made.

Now to the USA and the announcement of a dramatic increase in citizenship renunciations.  According to Internal Revenue Service figures, at least 1,800 Americans renounced their USA citizenship in 2011, an all-time record at eight times the 2008 number.  The main reasons given are the USA’s worldwide taxation system, the Foreign Bank and Financial Accounts rules and  the Foreign Accounts Tax Compliance Act regime.  An article on this from the Daily Mail online can be found here.  The USA is one of a handful of countries to tax its citizens on income earned while abroad.

Then there were two.  Francois Hollande defeated Nicolas Sarkozy in the first round of France’s presidential elections.  The tax and fiscal policies of the final two candidates, in particular Hollande’s, have received a great deal of international press coverage.  An example of this coverage, from Bloomberg’s Paris correspondent, can be found here

Now to a Budget statement from 1940.  “New British budget announced: higher income tax, increased duty on alcohol, tobacco & matches, to raise an unprecedented £2bn for war costs.”  Thanks to @RealTimeWWII.  Notwithstanding duty on matches interesting to see how little has changed.

Finally I was very sad to hear of the death of Stephen Maxwell.  I got to know Stephen very well over the last few years and he is a great loss to those arguing for greater fiscal powers and the wider independence movement.  A real gentleman at all times.

Have a great weekend.

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A glorious week of sunshine in “tax land”

I will start with where to find one of the most comprehensive and detailed review’s of last week’s UK Budget statement.  The link is to the always impressive Institute of Fiscal Studies and can be found here.  In particular see the “Business tax, stamp duty and anti-avoidance slides”.  Slide 9 on “Forecast revenue from anti-avoidance measures” is particularly revealing.

Now to the fiscal powers debate.  I was disappointed to see that Peter de Vink has been deselected by the Scottish Conservatives.  Peter was hoping to be elected to Midlothian Council in May.  As far as the fiscal powers debate is concerned this shows that there are some on the centre right in Scotland who can see the opportunities that fiscal autonomy or independence could bring.  Peter’s article in the Herald can be found here.

The First Minister has announced the setting up of a “Fiscal Commission Working Group” to establish a fiscal framework for an independent Scotland.  The group will include former World Bank Chief Economist and Nobel Prize winner Jospeh Stiglitz of Columbia University.  My only slight concern relating to this group is that it comprises four economists, albeit eminent economists.  This group needs to ensure it has an understanding of the underlying law and legal framework that is crucial to creating a new fiscal framework for Scotland.  That includes the creation of a Scottish Exchequer.  I will once again reiterate my call for a review of all government tax, law and registration services in Scotland.  A Scottish Government press release on this can be found here.

I was also interested to read about a report by the David Hume Institute which claimed that an independent Scotland would be liable for around £100bn of debts and liabilities.  In particular I was interested to see one of the first references to the “other side of the balance sheet”.  The report says that the UK has approximately £821bn of “assets”. The £100bn figure comes from deducting £69bn of assets from approximately £152bn to £171bn of debts and liabilities.  A Scotland on Sunday article on this story can be found here.  This particular part of the fiscal powers debate has a long way to go.

In advance of May’s local government elections, Reform Scotland has called for non-domestic rates to be devolved in full to local authorities.  This would mean a variable business rate in different areas of Scotland.  The Reform Scotland paper can be found here.  Non-domestic rates is one of two tax powers presently devolved to the Scottish Parliament, the other being council tax.  Although these taxes are administered by the local authorities control rests with the Scottish Parliament.

The proposal would also mean that local authorities would keep the revenue they collect from business rates.  At the moment this revenue is handed back to the Scottish Government.  The Scottish Government then redistribute it as part of its grant to each local authority.  The Reform Scotland proposal could also be used as a framework for when control over the Crown Estate is devolved to the Scottish Parliament.

According to a study carried out by accountancy firm UHY Hacker Young, Edinburgh businesses contribute more to the UK economy per head of population than any other major city in the UK.  The main reason given is that Edinburgh wasn’t hit as hard by the financial crisis as London.  In addition, oil-rich Aberdeen was the only major UK city to see its economy grow during the recession.  This is excellent news for the Scottish economy.  An article from the Scotsman on this can be found here.

Now to corporation tax.  The Financial Times recently reported on how 15 multinational companies are considering locating substantial operations in Britain as a result of UK corporate tax reforms.  What I found most interesting about this report is when tax competition is discussed in a UK context it is a positive thing.  Contrast this with the tone of the debate over devolving control over corporation tax to the Scottish Parliament.

Continuing on the corporation tax theme.  It is not just the headline rate of tax that is important.  The underlying law which deals with, for example, reliefs is just as important.  Further evidence for this is shown by a recent statement by the European Commission.  The European Commission are claiming that the UK is breaking European law by imposing an immediate capital gains tax charge on companies that relocate to another EU member country.  The Commission has requested that the UK abolish this exit tax within two months, or be referred to the European Court of Justice.  I await the reaction to this by the UK Government with interest.  The statement from the European Commission can be found here.

The Unoccupied Properties Bill has been introduced at Holyrood.  At the moment empty and unfurnished residential properties are exempt from council tax for the first six months.  After that period, they qualify for a 10% discount.  Under this Bill local authorities will be given the power to charge up to twice as much council tax on residential properties that are empty and unfurnished.  It is hoped this will act as an incentive for home owners to bring their empty houses back into use.  The Scottish government has also announced a new loan fund which will be specifically targeted at projects bringing properties into use for affordable housing.

The new bill will also controversially reduce the non-domestic business rates discount for some empty commercial properties from 50% to 10%.  The argument put forward is that this will encourage owners to bring boarded-up shops back into use.  A report from the BBC news website on this can be found here.

Now to England.  Over 85% of local authorities have accepted the UK Government’s offer to freeze council tax rates.  This is contrast to the agreement reached between the Scottish Government and all of Scotland’s local authorities.  England’s local authorities were offered a one-off grant worth 2.5% of their budget if they agreed to the freeze.  More on this can be found here.

Let’s end with Wales and the news that the Welsh Government has started to consult on whether Wales should be a separate legal jurisdiction.  The Welsh government will ask the judiciary, lawyers and members of the public whether they want a jurisdiction along the lines of those found in Scotland and Northern Ireland.  An article from the Law Society Gazette on this matter can be found here.

Have a good weekend.

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A fairly quiet week in “tax land”

I would like to start with an observation.  Over the last few weeks I have attended a number of tax and law update seminars.  Without exception the speakers have commented on the constitutional debate.  Why should that surprise me?  Even a few months ago this would not have happened.  There might have been the odd mention of the Scotland Bill but even that would just be in passing.  As one of the few lawyers who were willing to discuss tax issues in a constitutional context over the last few years I find this a welcome development.  You never know someone may even listen to my call for a review if all government tax, law and registration services in Scotland.

Most Scottish local authorities will by now have sent out their 2012/13 council tax bills.  This is of course an unusual bill as we know in advance that it will be the same as last year.  One notable exception is Stirling Council which it seems almost by accident reduced its council tax.  Although I get the sense that the council tax “freeze” is being taken for granted it cannot go on forever.  It is obviously important politically and not just because we are just a few weeks away from our local elections.  That said, at some point there needs to be a new review of how we finance local government.  As someone who believes that our councils should have a degree of choice in this matter I would like to see this review begin as soon as possible.

The fiscal powers debate had a fairly quiet week.  No new “commissions” have been announced which is a relief.  An old favourite of those who oppose devolution and independence did though rear its head again.  Ruth Davidson talked about giving Scotland something called “real devolution”.  For “real devolution” read “no more powers for the Scottish Parliament”.  Ruth Davidson said: “I want to talk about devolution – not devo max or devo plus, or devo mix, or I can’t believe it’s not devo – but real devolution from Holyrood to people and communities across Scotland.”  This in my opinion is   similar to the argument that the Scottish Parliament already has lots of fiscal powers that it simply fails to use.  That particular argument is rarely seen outwith the opinion pages of the Scotsman.

An example of this type of thinking was given recently when the UK  Government decided not to devolve control over the Crown Estate to the Scottish Parliament.  Instead the UK Government passed some control over Crown Estate revenue to the National Lottery.  A decision that I think it is fair to say was unexpected.  More on Ruth Davidson’s statement can be found here.  I will ignore the fact that Ruth Davidson appears to be at odds with what the Prime Minister said on his recent visit.

I have been following with interest the debate on introducing a “minimum price” for alcohol.  This is a rare example of a policy where the aim is clearly to change behaviour and not just raise revenue.  I have written before on how policy makers sometimes disingenuously argue that a policy is to change behaviour rather than increase revenue or vice versa.  Personally I have struggled to understand the opposition to this policy.  That said, do I think that a policy of minimum pricing on its own is enough?  Of course not, nor does the Scottish Government and the myriad of health professionals who support this policy.

Do I think that an even better policy could be developed if powers over alcohol duty were to be devolved to the Scottish Parliament?  Yes I do.  This was also pointed out in the Scottish Government’s paper on “Devolving Excise Duty in the Scotland Bill”.  Specifically this would allow the Scottish Government to “align the revenue benefit with the public spending costs of alcohol consumption.”  This would also ensure that the main downside of a minimum price policy, extra revenue for the retailers of alcohol, can be balanced out.  Lastly devolution, as I often say, is complicated.  It makes sense to devolve those tax powers that are clearly connected with already devolved areas of responsibility such as health.  The Scottish Government paper can be found here.  A report from the BBC news website on this issue can also be found here.

The UK coalition government are clearly worried as to how they are being perceived on the now rather unfortunate phrase: “we are all in this together“.  The Deputy Prime Minister is reportedly softening his proposals on a so called “tycoon tax”.  I am not sure why this idea is being called a “tycoon tax” as this is simply a minimum net tax rate for a person’s total income.  In a speech to the Liberal Democrat conference on Sunday he made no mention of a minimum tax rate less than 48 hours after announcing it.  This idea is not a new idea.  Most recently it has been advocated by President Obama.  It is also has the advantage of a being a fairly simple idea.  The Deputy Prime Minister has suggested a 20% rate.  President Obama a 30% rate.  The Obama proposal appeared shortly after it was reported that Republican candidate Mitt Romney, a multimillionaire, had a net tax rate of around 13%.  More on this can be found here.

Let’s finish with London.  Ken Livingstone has denied claims that he has not paid the “correct” amount of tax on his income.  Livingstone also claims that he is the victim of a “smear campaign”.  This story has some similarities with the furore that greeted the news that highly paid public officials were being paid via a company.  My earlier blog on this can be found here.  I have to admit to some sympathy with Livingstone on this one.  Yes there is an element of hypocrisy here but Livingstone is not an elected politician, albeit a candidate, nor is he is a public official.  An article from the Guardian on this can be found here.

Have a good weekend and let’s hope for some good news from Rome.

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“Tax land” from Islay

Always nice to get away from things for a while.  Islay gives you a different perspective.

Tax has only featured in three conversations here and as each also mentioned whisky I felt that made it acceptable.  The general sentiment seemed to be: “Islay gives a lot to the UK Exchequer every year and we get very little back in return”.

One person I spoke to told me that: “Islay’s whisky industry contributes approximately £100 million a year to the UK government in excise duty and value-added tax.”  To put that into context, and if that figure is correct,  that is about £30,000 for every man, woman and child on the island.

The main tax stories of the past week have a familiar feel to them.

The debate over devolving complete control over corporation tax to the Scottish Parliament has continued.  This week saw HM Treasury predicting doom and gloom if such a thing were to come to pass.  More ammunition for those wanting to see a Scottish Exchequer.

In a connected issue, Scotland’s First Minister said that the oil industry should be consulted on any new changes to offshore taxation.  The background to this is the proposal by the UK government to increase the supplementary charge on oil production from 20 to 32 per cent.

The other major political tax debate also rumbles on.  That being the top rate of income tax.  This still feels like a “phoney war” but you also get the feeling that a formal start to hostilities might just be round the corner.  The main warring parties in this case being the coalition partners of the UK Government.

This week saw twenty economists (makes you wonder what a group of economists is called), in a letter to the Financial Times, urging the UK Government to drop the top 50p tax rate.  They claim it is doing “lasting damage” to the UK economy.   The top rate is paid at 50p for each pound earned over £150,000 and affects around 310,000 people.  Opponents say cutting the top rate at a time of cuts would be “monstrously unfair” and “phenomenally immoral”.  UK Government Ministers continue to hedge their bets by saying that the 50p rate is temporary and that their policy is to first increase the income tax threshold to £10,000.

Although not as widely reported as the two issues above, I did like the council tax news item from the Courier.  The report explained how funds raised by increasing the council tax on second homes had helped to pay for affordable housing projects across the Perth and Kinross Council area.

In February 2005 Perth and Kinross Council agreed that additional money collected by reducing the council tax discount on second homes and long-term empty properties could be used to support the development of affordable housing.   The Council  reduced the 50% second home discount to 10%.  The reduction covers around 1,800 properties.

Back to the mainland tomorrow!

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Council Tax collection rates

The Convention of Scottish Local Authorities (COSLA), the umbrella body for Scotland’s 32 local authorities has warned that uncertainty over the economy and changes to the welfare system could reverse years of improving council tax collection rates.

Council tax collection rates rose again in the past year, up by 0.2% on the previous 12 months, despite more than £1 billion having gone unpaid since the charge began 18 years ago.

For 2010-11, £1.86bn was paid by March 31 from the total bill of £1.97bn.

Differences remain among local authorities, with taxpayers in Glasgow only paying 92.3% last year compared with a 97.6% total in Orkney.

Dundee recorded the highest increase with a collection improvement of 91.4% to 93% over the past year.The average percentage of bills collected annually across Scotland’s 32 councils increased from about 87.2% in 1998-99 to 94.6%.

The article in the Herald newspaper can be found here.

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