Let’s start with the Autumn Statement or in old money the pre-Budget Report.

There were only a few tax announcements of note.   January’s planned rise in fuel duty has been cancelled.   Not yet heard whether next August’s increase is also to be cancelled.  There have been further calls for the fuel duty escalator to be abandoned.  It will be interesting to see how the Scottish Government responds to the increase in business rates by the UK Government.  Tax competition within the UK; surely not.  There was also a tiny increase in the Bank Levy.

The Autumn Statement was of course dominated by the poor growth and debt figures.  It seems the reality of how we have got to this point and what lies ahead is slowly dawning.  According to figures published by the Institute for Fiscal Studies household incomes will fall by 7.4 per cent between 2009/10 and 2012/13 due to inflation and austerity measures.  This reportedly represents the worst fall in living standards since the three-day week in the 1970s and it would see an average family lose nearly £2,500 over the period.

Has the UK been living beyond its means?  Yes.  Is it going to take a number of years for the debt to work its way through the system?  Yes.  Do we now have a two tier public sector where the top tier earns more and has far greater benefits than the vast majority of those who work in the private sector?  Yes.  Will the UK and Scottish Governments have to deal with public sector wages, bonuses and benefits as well as pensions?  Yes.  Is there a quick fix.  No.

Now to the fiscal powers debate.  Interesting to see “devo max” being mentioned on the BBC’s One Show on St Andrew’s Day.  Did not expect  that.    The quality of the debate also surprised me.  Further evidence that this debate has now reached new pastures.

Interesting news report on the BBC website pages concerning the glacial process of devolving some parts of the corporation tax legislation to Northern Ireland.  It seems that a joint ministerial meeting is to take place before Christmas.  Three key points are to be addressed.  These are cost, how would this be administered and what form would the legislation take.  Not sure who is credited with first saying this but they are right.  “The main difference between evolution and devolution is that devolution takes longer.”  The article can be found here.

Now to Europe.

German Chancellor Angela Merkel has said: “Europe is working towards setting up a fiscal union in a bid to resolve the eurozone’s debt crisis.”  How quickly this debate is moving.   For example the European Union’s council of finance ministers has endorsed European Commission proposals for tax policy coordination through the so-called “Euro Plus Pact” concluded in March by 23 of the 27 member states. The report calls for avoidance of ‘harmful’ tax practices.

Interesting article on the proposed European Financial Transactions tax and how not everyone from the city of London is opposed to this proposal.   The article from the Scotsman can be found here.

One last point.  If you did not see this week’s Panorama programme on PFI and I would recommend you do so.  A school without light switches!  No transparency.  “Dodgy accounting”.  You could not make this stuff up.  This issue is not going away.  How lucky we are that we are now doing things differently in Scotland.   That said, the huge cost to us in Scotland is still going to be with us for a least a generation.   The programme can be found here.

 Have a good weekend.

The debate over a European financial transaction tax is gathering pace.  Let’s start with terminology.  The UK Government like to refer to this as a tax on London.  What they don’t understand, or maybe they do, is that this really annoys the European proposers of this tax.   Many European leaders and commentators blame London and New York for the banking crisis and cannot understand why the UK Government should be so protective of London.  I should add the continual reference to London also annoys me as Edinburgh is also a financial centre.  London is not the UK it is just part of the UK.

The UK Government say any such tax must be imposed world wide and not just confined to Europe.  The proposers point out that you have to start somewhere and if we wait for world wide agreement nothing will happen.  They also imply that this is what the UK Government secretly wants.  Do the European proposers understand the importance of London to the UK Government?  It seems not.  To complicate matters further Ireland has said that it will not introduce this tax if the UK does not.  I wonder what a fiscally autonomous or independent Scotland would do?

This debate cannot be separated from David Cameron’s newly found European scepticism.  I am sure the French will have laughed heartily when they heard David Cameron’s joke about a cheese tax!  I also suspect that commentators will soon catch on to the analogy between the UK Government’s desire for repatriation of powers from the European Union and the Scottish constitutional debate.  The analogy is an obvious one.

We also now know a bit more about the proposed tax:

• The European Commission says the tax would be levied at 0.1% on all transactions between financial institutions when at least one party is based in the EU
• Derivative contracts – bets on movements in currencies and other assets – would be taxed at 0.01%.
• The tax would be expected to raise about £50bn a year and would come into effect in 2014

Glad to see that the UK and Scottish governments have finally reached an agreement on allowing the Scottish Government to access its own fossil fuel levy funds.  This is a tax paid by suppliers of non-renewable energy sources.  The account holds approximately £206m.  Under the agreement, £103m will go towards Scottish renewable energy projects, including wave and tidal schemes.  The remaining £103m will be made available to support the capitalisation of the proposed Green Investment Bank.

Now to HMRC and its latest staff survey.   The conclusion is that its staff still have little faith in the abilities of their senior managers.   The latest staff survey showed only 13% felt changes were usually for the better; only 15% felt change was well managed; and only 17% had confidence in the decisions of senior managers.  Although these results were better than last year, 20% of staff still wanted to leave immediately or in the next year.  The 38,416 staff who responded represented a 52% response rate.  HMRC commented: “Since our last survey results there have been improvements that give rise to cautious optimism”.  The full story can be found here.

Every taxpayer may be given online access to their tax records.  This idea is part of a UK Government consultation on making the personal tax system easier to use and understand.  Other ideas include supplying pre-filled tax returns to people in the self-assessment system, using information from employers and banks, and sending each taxpayer an annual tax statement in addition to their normal P60 form and PAYE tax code notice.  Good to see a UK Government thinking about things from the point of view from the taxpayer.

Now to a claim from a Scottish accountant that HMRC is disproportionately targeting Scottish businesses.  HMRC said it would launch nine new task forces to investigate specific industry compliance in the 2011/12 year, seven of which are already running.

One for the first task forces to launch, targeting the restaurant trade, has so far launched investigations into 531 UK restaurants with 222 (42 per cent) of those in Scotland.  This compares with just 159 investigations for the whole of London and 150 in the North West of England.  The full story can be found here.

I will end with the Scotland Bill and whether it will become an Act.  What is interesting is how commentators have suddenly woken up to the fact of how much danger the Bill is in.  The Bill could be scuppered by either the Scottish or UK Governments.

One reason for this is the supposed supporters of this Bill seem unable to defend or even explain the contraversial income tax proposal.  As Malcolm Chisholm MSP pointed out last week at Holyrood’s Scotland Bill conference, the proposers of the Bill have failed to explain why the Bill is a positive move for either the Scottish Parliament or the Scottish people.

Have a good weekend.

Two main taxation topics from the SNP conference.  Not supprisingly North sea oil and gas taxation was one.  One reason for this are the recent announcements that over half of the North sea and oil gas reserves remain.  That alone ensures that this issue will play a major part in the independence referendum.  The House of Commons Energy and Climate Change select committee has also this week criticised the UK Government’s recent “£10bn raid on North Sea oil profits”.

The other taxation issue that received a lot of coverage was the independent referendum and the number of options given.  The main question will be a yes or no to independence.  It is though a possible second question that has ignited so much debate.  A possible second question is likely to be a yes or no to greater fiscal and tax powers, but short of independence, for the Scottish Parliament.  How “short” is the tricky part.  There are a lot of options between the Scotland Bill proposals and full fiscal autonomy.

The press have termed this option “devo max”.  As one of the authors of Reform Scotland’s “fiscal power” papers I can confirm that one of the hardest issues is trying to find a suitable title.  Other terms commonly used are: fiscal responsibility, “home rule” and fiscal autonomy.  It will be interesting to see this debate develop.  Lots of questions.  Some of these include:

1. what is “devo max”?

2. who is going to define it?

3. who is going to campaign for it?

4. would the UK Government abide by a vote in favour of “devo max” but not independence?

5. what are the estimated costs and timescales?

Now to Europe and the latest agreement by the Eurozone countries.  One likely outcome of this crisis is that the  Eurozone countries will begin the process to more closely align their tax and fiscal policies.  Most commentators now seem to be saying that if you have a common currency you also need similar tax and fiscal regimes.  How “similar” is going to cause a lot of debate.  The debate has of course already started.  I have blogged previously on how hard the Irish government are fighting to retain its low rate of corporation tax.   It is not difficult to see the similarities with the Scottish independence debate as the  Scottish Government’s prefernce is to retain Sterling in the event of independence.

The debate over whether to retain the 50p rate of income tax was reignited this week when Paul Walsh, chief executive of Diageo, said that: “the 50p rate threatened to cause long term damage to Britain’s competitive edge”.  Paul Walsh’s comments contrast with those of Sir Stuart Rose, the former head of Marks and Spencer’s, who has supported the 50p rate.   George Osborne has of course commissioned a study on the revenues being received from the 50p rate.  That said, the debate is much wider than just the question of how much revenue is being raised.  The debate is just as much about the perceived fairness of the UK’s tax system.  It was ever thus.

Now to the so called “Retail tax levy”.  The Scottish Retail Commission claim that the proposed levy on major supermarkets selling alcohol and cigarettes breaches the Scottish Government’s own business rules by not carrying out an impact study on any such change.  The Scottish Government responded that as the levy only affects 0.1% of retail turnover the cost of a Business and Regulatory Impact Assessment would be disproportionate.  This debate is going to run and run I suspect.

Now to Aberdeen and the news that the first phase of work to improve Aberdeen city centre has begun.  More than two thirds of firms in the area voted in favour of a Business Improvement District earlier this year.  The companies agreed to pay into a fund with the aim of raising more than £3m for work to help attract more visitors.  The first phase of work includes cleaning guttering and building facades to help improve the city centre in the run-up to Christmas.

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.

More debate on the top rate of income tax.  John Mason, former MP and now SNP MSP, suggested that the top rate of income tax is increased when the power to vary income tax rates is passed to the Scottish Parliament.  This proposal was given short shrift by the First Minister.   Eric Pickles, UK Community Secretary, wants to slash the top rate of income tax and thinks that imposing a “mansion tax” would be a mistake.

The UK Government’s deal with the Swiss banks got a mixed reaction.  The Swiss government has agreed to tax money held by UK taxpayers in Swiss bank accounts for the first time, while still hiding their identity.  The mixed reaction is because the amount of tax likely to be paid will be just a fraction of what is actually owed.

The campaign to reduce the rate of VAT on domestic property repairs and improvements has continued.  One point that as yet has not received much coverage is the fact that the Isle of Man has already negotiated such a reduced rate with HM Treasury.  More on this can be found here.

The fact that the French and German governments are pressing for a unified rate of corporation tax for the Euro zone countries has received a fair bit of coverage particularly in Ireland.  I suspect the fact that the same governments are also again, and with a fair bit of urgency, pressing for a European “financial transaction tax” will receive increased coverage.  This is also known as the “tobin tax”.

There has been an increasing number of stories on the action HMRC is taking on VAT and other forms of tax fraud.  This makes sense given the cutting of HMRC’s budget.

It is now clear that there are two different tax debates going on within the UK and a further European debate just to complicate matters.

Firstly there is the debate over the top rate of income tax.  The various press leaks and briefings show how important the UK coalition parties view this issue.  The Tories are laying the groundwork for its removal.  The Liberals are fighting a rearguard action.  Think of the Treasury Secretary’s “cloud cuckoo land comment.   The Liberals are also briefing on its own “mansion tax” policy.  If the top rate is abolished they want it replaced by a mansion tax.  The SNP and Labour are arguing for the top rate to be retained.

Then there is the devolution of tax powers to the Scottish Parliament.  My blog on this last Sunday can be found here.   The Scottish Government published its paper on corporation tax this week.   The paper can be found here.  As I said last Sunday, it is not what is being discused that I find most interesting but rather what is not being discussed.   I suspect that the real battle on this has still to start.

Then there is the European dimension and in particular the pressure being placed on Ireland by France and Germany over its low rate of corporation tax.   This issue also impacts on the UK tax debate as it poses the question: why is tax competition within the European Union a good thing but not within the UK?   As I said, an interesting week in tax land.