I am surprised that Labour has backtracked on almost all of the tax proposals it made in its interim report.  I did not expect Lamont to be so thoroughly routed by her opponents in her own party on the need to extend the powers of the Scottish Parliament in any meaningful way.  The final report can be found here and my blog on the interim report can be found here.

The final report does not even go as far as the final recommendations made by the Calman Commission.  Calman recommend 6 new tax powers for the Scottish Parliament.  The Scotland Act 2012, often referred to as “Calman minus” only implements 3 of them.

This is from the final report: “We concluded that, for a variety of good reasons, VAT, national insurance contributions, corporation tax, alcohol, tobacco and fuel duties, climate change levy, insurance premium tax, vehicle excise duty, inheritance tax, capital gains tax and tax on oil receipts should remain reserved.” It is not clear from the final report if the Aggregates Levy will be devolved.  What is meant by the Crown Estate recommendation is anyone’s guess.

With regard to the only tax power left standing when the music stopped; income tax.  The interim report said: “In our view, a strong case exists for devolving income tax in full, and we are minded to do so“.  How Labour got from that point to the income tax proposal announced yesterday is again anybody’s guess.  I will come back to that point.

This announcement must also have exasperated those still arguing for “devo plus” and “devomax”.  These proposals are often misunderstood, often intentionally.  “Devo Plus” would devolve almost all tax and welfare powers.  “Devo max” goes even further. Remember there are over 25 taxes, charges and duties when comparing the Labour proposal to “devo plus” or “devo max”. The Labour proposal such as it is, when taken together with the recent announcements by the Liberal Democrats and the Conservatives may well prove to be the final straw for those arguing for the devolving of substantial powers for the Scottish Parliament. That I suspect can only be good news for the “YES” campaign.

Johann Lamont was unable to even answer basic questions on the income tax proposal when she was interviewed on Newsnight Scotland.  A link to this interview can be found here.  To be fair, I am not sure if anyone could easily explain the income tax proposal.  If I was the cynical type I might suggest that this looks like a policy that is intentionally created to make sure it never sees the light of day.  I was also interested to hear that she is opposed to tax competition if it involves Scotland.

This is from my chapter in the Hassan/Mitchell publication “After Independence” and titled: “The continuing battle for Scottish tax powers”.   Nothing it seems has changed.

“So how have the opponents of substantial tax powers for the Scottish Parliament been able to ensure that substantial tax powers are not devolved to the Scottish Parliament?  A template can be seen from Calman, what might be called the “Calman doctrine”. Make a huge fuss about having someone look at the issue, take your time, offer as little as possible, exaggerate any problems, minimise or ignore any advantages and ensure HMRC and HM Treasury remain in control.”

I  have been asked a number of times recently to comment on a likely timescale for additional tax and fiscal powers if Scotland votes ‘NO’ in September 2014.

Estimating a likely timescale is not that difficult a task.  It may though be a pointless task if as is likely this issue is for all intents and purposes ignored by Westminster.

Recent delays to the devolving of additional fiscal powers to both Northern Ireland and Wales give an indication of the sense of priority these matters even now are given at Westminster. Add to this the background of the 2015 UK General Election and the debate surrounding the UK’s membership of the European Union.  This means that the likelihood of Westminster devoting anything more than a token amount of time and effort to yet another debate on which tax and fiscal powers to, or more realistically not to, devolve to the Scottish Parliament cannot be high.

The debate for additional powers is also not going to be all one way.  Those arguing for additional powers after a ‘NO’ vote will also have to counter those calling for powers to be removed from the Scottish Parliament or even that the Scottish Parliament be abolished.

That said, one recent example does gives us some idea of how long these things take.

• SNP win May 2007 Scottish General Election
• Calman Commission set up December 2007
• Interim report published December 2008
• Main report published June 2009
• 2010 UK General Election and change of government resulted in a review of the matter
• Scotland Act May 2012
• Powers to be devolved in April 2015 and 2016

So 8 or 9 years and that is where very few powers were being devolved and there was a large amount of consensus between the main UK parties.

8 or 9 years may though be unduly optimistic.  Calman was set up within six months of the SNP’s victory. Would something similar be set up so quickly in the event of a ‘NO’ vote given how close the next UK General Election was?  I suspect not.  That means any additional powers are not likely to be in the control of the Scottish Parliament for at least a decade.

Also worth remembering that three of the six tax powers recommended by Calman were omitted from the Scotland Act 2012.

Tax issues are and will continue to play a central role in the Scottish independence referendum debate.  The debate is not just about whether tax powers reside in Edinburgh or London.  What about Brussels or each local authority?  What about tax avoidance?  What about the type and form each tax takes?  If Scotland votes ‘YES’ should it retain the UK system for a number of years before any major changes are made?

The presentation is in three main parts and continues on from my blog: “Tax powers so far refused by Westminster”.  This blog can be found here.

1. The present position and the “battle for Scottish tax powers”

2. What the Unionist parties are likely to offer in the event of a ‘NO’ vote

3. Compare and contrast this with a ‘YES’ vote

If you would like to find out more about this presentation please feel free to contact me at: james@legalknowledgescotland.com

I have updated this blog as we now have updated “GERS” figures and the Scottish Labour party has published its interim “Devolution Commission” report.  Its findings are similar to the Liberal Democrat proposal.

Although the Scottish Conservatives now appear to be moving towards arguing for the devolving of further tax powers there is as as yet no firm proposal from them.

Listed below are the taxes, duties and charges that Westminster has so far refused to pass control to the Scottish Parliament.

In bold are the additional powers the Liberal Democrats are putting forward for devolving.  This information is from its “Home Rule Commission” published in October 2012.

In red are the additional powers the Scottish Labour party might argue for devolving.  I say “might” as its report is an “interim” report only.

The figures are mostly from the “Government Expenditure & Revenue Scotland 2011-12” (GERS).  The figures are included to give an idea as to the level of revenue produced by a particular tax and are a number of millions of pounds.

1. Full control over income tax including the underlying law dealing with reliefs etc (some additional powers but not complete control)  (similar proposal from Labour) 10,790
2. National insurance contributions  8,393
3. Corporation tax (assignation of revenue only)  2,976
4. North Sea revenue  10,573
5. Fuel duties  2,296
6. Capital gains tax (partial control only) (similar proposal from Labour) 246
7. Inheritance tax (to be devolved)  (possibly)  164
8. Other stamp duties – stamp duty and SDRT on shares (estimated)  276
9. Tobacco duties  1,129
10. Alcohol duties  (includes spirit, wine, beer and cider duties)  981
11. Betting and gaming duties  115
12. Air passenger duty (even though included in Calman) (not clear if to be completely devolved)  (similar proposal from Labour)  213
13. Insurance premium tax  251
14. Climate change levy  64
15. Aggregates levy (even though included in Calman) (not clear if to be completely devolved) (similar proposal from Labour)  52
16. Vehicle excise duty  (possibly)  475
17. Bank levy (estimate as no separate Scottish figure)  180
18. Licence fee receipts  325
19. Crown Estate revenue  (not clear if to be completely devolved) (if Scottish Parliament accepts UK Government terms)  10
20. VAT cannot be devolved but VAT revenue could be assigned  9,554

Taxes already devolved to be devolved under Scotland Act 2012

1. Income tax (still only partial control over tax bands and will cost Scottish Parliament millions of pounds a year to administer even if not used)  (estimated partial control over)  5,395
2. Council tax  1,987
3. Business rates  1,933
4. Stamp duty land tax (Scottish Parliament control by April 2015)  330
5. Landfill tax (Scottish Parliament control by April 2015)  97

The Scotland Act 2012 also does not resolve the imbalance between the amount the Scottish Parliament is responsible for spending and which it raises.  The Scotland Act 2012 only takes us to about a third.

Let’s start with the incredible revelation that large multi-national companies put a great deal of effort into paying as little tax as possible.  The debate surrounding this issue is long overdue.  I am also glad to say that there has been some great commentary on this issue.

Examples include:  Ian Bell’s: “It’s not an accident Westminster’s financial system allows tax avoidance … it’s designed that way”.  His article from the Herald can be found here.

Joyce McMillan outlines the wider debate and criticises the focus at Westminster on benefit fraud rather than tax avoidance.  Her article from the Scotsman can be found here.

George Kerevan’s article titled: “Taxing questions for complicit governments” from the Scotsman can be found here.  This is from the article: “The current generation of highly profitable internet companies have taken (legitimate) transfer pricing to extraordinary new limits. Google manages to operate almost tax-free in the UK, France and Germany, despite generating more than £35 billion in revenues in all three countries.”

Alsion Rowatt writing in the Herald comments on the increasing evidence of multinational corporations’ tax avoidance and criticises the HMRC for not keeping up with the internet age.  This article can be found here.

And from the Guardian: “The bosses of some of Britain’s largest multinational corporations have urged David Cameron to stop moralising and rein in his rhetoric on tax avoidance.”  The article in full can be found here.

For an example as to how far some companies will go look no further than our utility companies.  More on this from the Telegraph can be found here.

To summarise.  Companies rarely consider “morality” when deciding how much tax to pay.  I use the word “decide” intentionally.  These companies after all have a duty to their shareholders.  The fact is that UK and international taxation law is full of holes and has always been.  The politicians know this.  The politicians have always known this.  In the so called good times this issue was simply ignored.  Is there an easy answer? Of course not.  Do the politicians desperately want to be seen to be doing something? Of course.  Is there a huge amount of hypocrisy around this issue?  Yes.  Do governments want inward investment?  Yes.  Will they offer tax breaks to achieve this?  Yes.  Is the headline rate of tax the only deciding factor for companies?  Of course not.  Is there a growing perception in the UK that the taxation favours certain sectors over others?  I believe so.  Is this debate going to continue?  I hope so.

Now to the fiscal powers debate and two stories on the Scottish Conservatives.  The headlines contain the phrases “under attack” and “under fire” and show how difficult a position Ruth Davidson is in.  It seems she is damned if she does, damned if she doesn’t.  The Scotsman article can be found here and the Herald article here.

The head of one of the UK’s largest quarries has accused tax collectors of “arrogant and high-handed behaviour” ahead of a case this week involving millions of pounds in unpaid aggregates levies.  Aggregates levy was of course one of the taxes recommended for devolving under Calman.  The article from the Scotsman can be found here.

Now to London.  Boris Johnson continues to argue that London should have the same fiscal powers as those available to the devolved parliaments in Scotland and Wales.  This is a debate that is going to run and run.  More on this can be found here.

HMRC has begun a campaign to make professional football managers and coaches regularise their tax position. It has forced the English Football Association to provide a list of its 3,300 registered coaches, and has written to them all warning that “we have received extensive data about coaches from sources in the football community”.  Presumably HMRC knows that football is played in Scotland as well.  More on this can be found here.

Now to Europe and another example of the increasing role it is playing in tax matters.  The European Commission will present a legislative proposal to require the EU-wide automatic exchange of all types of information on taxable incomes, including dividends, capital gains, salaries, directors’ fees, pensions, life insurance and rents, rather than just interest as now. It will be implemented by an amendment to the EU Directive on Administrative Cooperation which came into force in January.  More on this can be found here.

Now to the USA.  Criminal investigations by the Internal Revenue Service rose 9% to 5,125 in the last fiscal year.  The number of convictions has risen to 2,634 aided by a 93% conviction rate.   More on this can be found here.  I suspect the trend is similar in the UK.

Again from the USA and a story that will I am sure run and run.  The IRS has admitted that its staff gave special scrutiny to the tax-exempt status of organisations supporting the conservative Tea Party alliance during the 2012 presidential election campaign. The IRS says it was trying to distinguish between political organisations as such, and social welfare organisations that are not allowed to engage in political campaigning as their primary activity.  US President Obama has now sacked the Head of the IRS, Steven Miller and the FBI has launched a criminal investigation into the affair.  Two articles on this from the Wall Street Journal can be found here and here.

And finally to France.  The French Government has dropped plans for corporate governance legislation to cap executive pay. Instead the 2014 Budget will introduce the long-threatened 75% levy on employers who pay salaries over €1m.   More on this from Reuters can be found here.

Have a great weekend.

Let’s start with an issue that is at last beginning to reach the top of the political agenda, tax avoidance.

The UK National Audit Office has released a report suggesting that HMRC is being “overwhelmed” by the scale of tax avoidance, claiming that the UK is losing out by more than £10bn in lost tax revenue.  The Comptroller and Auditor General, Amyas Morse, stated: “HMRC must push harder to find an effective way to tackle the promoters and users of the most aggressive tax avoidance schemes”.  But according to the NAO, between 2004 and 2011 approximately 2,300 avoidance schemes were disclosed to HMRC.  A report on this can be found on the BBC news website which can be found here.  The NAO report can be found here.

That shows the scale of the problem.

Then there is the sight of a number of Chief Executives from several of the world’s top companies giving evidence to the House of Commons Public Accounts Committee on the issue of tax avoidance.  Representatives from Google UK, Starbucks and Amazon were answering questions on tax arrangements for multinational companies.  Their responses show how big business views this issue and interference by politicians.  More on this from the BBC news website can be found here.

Also on this issue.  The Managing Director of John Lewis, Andy Street has said that the failure to resolve the issue would risk driving UK firms out of business.  Street’s comments were aimed at Amazon, which is accused of failing to pay the correct rate of UK corporation tax. He said that UK companies would be “out-invested” and “out-traded” by the US-based internet retail giant.  More on this from the Telegraph can be found here.

There is also some evidence that HMRC is losing this “battle”.  The European Court of Justice has ruled that the UK Government must refund several UK-headquartered multinationals up to £5bn worth of corporation tax.  The companies, led by British American Tobacco, were found to have been treated unfairly by HMRC which retrospectively blocked tax refund claims dating as far back as 1973.  HMRC said it was “very disappointed” at the ruling.  Glad that it was not “happy”.  More on this, again from the Telegraph, can be found here.

Then there is the tax tribunal decision in favour of the former Rangers Football Club.   The decision of the first tier tribunal was not unanimous and HMRC is considering an appeal.  More on this from the Scotsman can be found here.

An example of what HMRC is trying to do also highlights the scale of its task.  HMRC has launched a taskforce to pursue landlords in the south east of England who fail to declare rental income.  It is expected to recover £4m out of the estimated £550m of tax evaded annually by landlords across the UK.  A press release from HMRC on this matter can be found here. 

The statement from UK Business secretary Vince Cable sums up nicely the quandary for politicians.  Cable has called for action against corporate tax avoidance but also stressed the need to encourage investment.  He pointed to anger amongst small and medium sized businesses that multinational corporations are able to avoid tax without consequence.  More on this from the Scotsman can be found here.

I liked this: “High-street shops turn fire on Amazon’s tax avoidance”.  More on this can be found here.

Now to the fiscal powers debate.

Edward Troup, the person responsible for the collection of the Scottish rate of income tax at HMRC, has told MSPs that the Scottish Government would have to pay the costs of any changes to the Scottish rate of income tax.  More on this from the Scotsman can be found here.  This is in fact one of the reasons why I think a tax needs to be devolved in its entirety.

Also on this issue, and some sensible observations by Iain Gray, convener of Holyrood’s Audit Committee.  Gray said that the Scottish Parliament must be able to exercise greater oversight of HMRC when the Scottish Parliament will become responsible for raising half the income tax in Scotland from 2016.   More on this from the Herald can be found here.

The Devo Plus group, which was set up by Reform Scotland, has published its latest paper on further powers that could be devolved to the Scottish Parliament as long as Scotland votes NO.  More on this from the Scotsman can be found here.  The paper  can be found here. Notable that the Conservative representative acknowledged that he was there in a personal capacity and not representing his party.  Ruth Davidson has of course made her opposition to further powers clear.  The problem with this approach is an obvious one.  Can anyone say with a degree of certainty that major powers will be devolved to Scotland if Scotland votes NO.  To see how far apart the opposing sides in the independence debate are have a look at one of my recent blogs.  This blog lists the tax powers that Westminster has already said no to.  My earlier blog can be found here. Even the Liberal Democrats, the party that historically has went the furthest on this issue, now wishes to devolve only a handful of additional tax powers.

Now to some commentary on the recent Institute for Fiscal Studies report on the economic possibilities of an independent Scotland.  The excellent piece by Ian Bell in the Herald can be found here.  The argument that Scotland’s oil wealth is a potential problem for Scotland is simply ridiculous.

The Times has reported that sales of homes valued between £2m and £5m in Greater London have fallen by 29% per cent in the third quarter, according to figures from the Land Registry.  I was interested to read that “industry experts” have blamed the fall on changes to stamp duty land tax in the last UK Budget.  London Central Portfolio, a high-end residential property investment fund, said: “The fall in transactions is almost definitely a result of the uncertainty and negative sentiment caused by the tax changes announced in the 2012 Budget”.  It seems that uncertainty can be caused by something other than the debate on Scottish independence. The report in the Times can be found here.

And finally to France.  The French Government has announced new measures against tax avoidance and fraud for companies and individuals. Failure to disclose the origin of offshore assets will attract an automatic 60% tax rate.  The French tax authorities will also demand an explanation of all individual payments exceeding €200,000.  Vive la France.

I have updated this blog as we now have updated “GERS” figures and the Scottish Labour party has published its interim “Devolution Commission” report.  Its findings are similar to the Liberal Democrat proposal.

Although the Scottish Conservatives now appear to be moving towards arguing for the devolving of further tax powers there is as as yet no firm proposal from them.

Listed below are the taxes, duties and charges that Westminster has so far refused to pass control to the Scottish Parliament.

In bold are the additional powers the Liberal Democrats are putting forward for devolving.  This information is from its “Home Rule Commission” published in October 2012.

In red are the additional powers the Scottish Labour party might argue for devolving.  I say “might” as its report is an “interim” report only.

The figures are mostly from the “Government Expenditure & Revenue Scotland 2011-12” (GERS).  The figures are included to give an idea as to the level of revenue produced by a particular tax and are a number of millions of pounds.

1. Full control over income tax including the underlying law dealing with reliefs etc (some additional powers but not complete control)  (similar proposal from Labour) 10,790
2. National insurance contributions  8,393
3. Corporation tax (assignation of revenue only)  2,976
4. North Sea revenue  10,573
5. Fuel duties  2,296
6. Capital gains tax (partial control only) (similar proposal from Labour) 246
7. Inheritance tax (to be devolved)  (possibly)  164 
8. Other stamp duties – stamp duty and SDRT on shares (estimated)  276
9. Tobacco duties  1,129
10. Alcohol duties  (includes spirit, wine, beer and cider duties)  981
11. Betting and gaming duties  115
12. Air passenger duty (even though included in Calman) (not clear if to be completely devolved)  (similar proposal from Labour)  213
13. Insurance premium tax  251
14. Climate change levy  64
15. Aggregates levy (even though included in Calman) (not clear if to be completely devolved) (similar proposal from Labour)  52
16. Vehicle excise duty  (possibly)  475 
17. Bank levy (estimate as no separate Scottish figure)  180
18. Licence fee receipts  325
19. Crown Estate revenue  (not clear if to be completely devolved) (if Scottish Parliament accepts UK Government terms)  10
20. VAT cannot be devolved but VAT revenue could be assigned  9,554

Taxes already devolved to be devolved under Scotland Act 2012

1. Income tax (still only partial control over tax bands and will cost Scottish Parliament millions of pounds a year to administer even if not used)  (estimated partial control over)  5,395
2. Council tax  1,987
3. Business rates  1,933
4. Stamp duty land tax (Scottish Parliament control by April 2015)  330
5. Landfill tax (Scottish Parliament control by April 2015)  97

The Scotland Act 2012 also does not resolve the imbalance between the amount the Scottish Parliament is responsible for spending and which it raises.  The Scotland Act 2012 only takes us to about a third. 

Let’s start with the independence debate.  I would normally refer to this as the “fiscal powers” debate but there seems little point as that ship appears to have sailed.  Some things are becoming clearer.  There is not going to be a second question.  The likelihood of serious additional fiscal powers being devolved to the Scottish Parliament if Scotland votes ‘No’ also now seems increasingly unlikely.

It is not difficult to imagine the appetite for even listening to arguments for additional fiscal powers at Westminster in that event.  That is where the Devo Plus campaign has got it wrong.  And I say this as one of the authors of the Reform Scotland Fiscal Powers papers on which their proposal is based.  Devo Plus are arguing for a ‘No’ vote and also that there should not be a second question.  Do they really think Westminster will seriously consider devolving further powers to the Scottish Parliament if Scotland votes ‘No’?  An article by Jeremy Purvis who leads the Devo Plus campaign can be found here.  On a personal note it is disappointing to see that Reform Scotland have now taken a stance on Scotland’s constitutional question by its support for Devo Plus.

The fact that only the Liberal Democrats are going to have a further devolution proposal by the time the referendum takes place reinforces this argument.

So if there is not to be a second question, what do those who have supported devo max previously do?  The impact and importance of Jim McColl’s announcement in favour of independence should not be under estimated.  A BBC news website report on this can be found here.

Now to taxing the wealthy.  Just now politicians seem to talk of little else.  Let’s ignore for now what actually constitutes wealth.

Let’s start with an article by George Kerevan on the Scotsman.  Kerevan argues against taxing the wealthy, believing that it is arbitrary, complicated to administer, and does not raise enough money relative to the trouble it takes to collect it.   His article can be found here.

Nick Clegg wants to ensure that the rich “pay their fair share”.  He has vowed to block further welfare cuts until a mansion tax is agreed with his Tory coalition partners. Vince Cable has also spoken out against tax havens and non-domiciles.  Then there is Danny Alexander.  He has promised tax investigations for all those who own assets worth more than £1 million.  The cynic in me says: I have heard a lot of this before and not just on tax reform.  What about the banks.  Has anything of substance actually been done?

Then there is the evolving love in between Ed Balls and Nick Clegg.  Ed Balls told the Independent newspaper that a future Labour UK Government could impose an annual levy on expensive properties, unlike Nick Clegg though, he favours a permanent rather than temporary wealth tax.  The article in the Independent can be found here.  This does seem more like mischief making than serious policy making given how long the last UK Labour Government were in power.

One reason for my cynicism is a claim made by the SNP this week.  The claim is that there are fewer, not more, tax inspectors.  I have blogged before on how HMRC’s budget has been reduced and of the large number of HMRC redundancies.  If we are serious about tackling tax evasion then you need a properly resourced tax collection agency.  Transparency would not go a miss either.  How about publishing tax returns?  The SNP press release on this can be found here.

So what can be done?  HMRC’s High Net Worth Unit has brought in £500 million in extra tax from the UK’s 5,000 wealthiest people since it launched three years ago. The amount collected is well over the original target of £100 million a year.  A press release from HMRC on this can be found here.  And of course this was achieved in a time where HMRC’s budget has been cut.

Finally on this issue, an excellent article by Iain MacWhirter in the Herald.  MacWhirter points to the relative insignificance of the cost of the so called “free services” as compared with the salaries and pensions of the higher-earning public sector workers.  The article in the Herald can be found here.

These services are of course not “free”.  They are paid for by taxation.  Taxation is simply a series of political choices.

The introduction of a 15% rate of stamp duty land tax on corporate buyers in this year’s UK Budget, it is claimed, has had a dramatic impact on the high-value London property market.  The article from the online STEP journal can be found here here.  I must admit to struggling to see why this is a bad thing.

About 60% of all taxpayers’ complaints against HMRC are upheld on appeal, according to figures from Pinsent Masons. Some 58,110 complaints were made last year, of which more than 33,000 were accepted either by an internal HMRC review or by the Adjudicator’s Office.  A report on this can be found here.

Barclays Bank is to cut back on its UK tax planning unit, after a dispute with the tax authorities over ‘aggressive’ schemes tarnished its public image.  A report on this can be found here.

Now to matters slightly further afield.

Firstly to America and the never ending saga of Mitt Romney’s tax affairs.  Romney has at last published his 2011 tax return.  It turns out Romney and his wife paid $1.936 million in taxes on gross income of $13.7 million.  That is a tax rate of 14.1%.  The article from the online STEP journal can be found here.  I suspect that this is not the end of this matter.

Francois Hollande has revealed details of his 75% top rate of income tax for France’s wealthiest citizens.  Newspaper reports suggest there are likely to be concessions for married couples, performers and sports stars.  Meanwhile the richest man in France, Bernard Arnault, has applied for Belgian nationality to escape the tax.  An article on this from the Guardian can be found here.  Again, I suspect that this is an issue that is going to run and run.

A Spanish newspaper has reported that the country is about to double capital gains tax on short term gains to 52%.  This gives a sense of the level of problems now faced by Spain.  An article on this can be found here.

Have a good weekend.

Let’s start with Gordon Brown’s comments and in particular his claim that devolving tax and fiscal powers to the Scottish Parliament automatically means a “race to the bottom” for tax rates and in particular business tax rates.  There are a number of problems with this statement.  I will simply point out two.  Tax competition already exists.  Not just within the European Union but throughout the world.  Then there is the fact that the underlying law, for example tax reliefs, are just as important as tax rates to business.  Creating a Scottish tax system is also a once in a generation chance to create a simpler and more progressive tax system.  This opportunity is not available to the UK.  Evidence that the present Scottish Government is already putting this opportunity into practice is shown by its excellent consultation on a Land and Buildings Transaction Tax.  My earlier blog on this can be found here. 

Again on tax powers for the Scottish Parliament.  I was disappointed, but sadly not surprised, to see another patronising picture accompanying an article in Tax Adviser on the subject of the tax powers being devolved to the Scottish Parliament.  First we had a man in a kilt holding a whisky bottle and this month a scene from the movie Braveheart.    

Now to some incredible news.  HM Treasury is going to employ someone in Scotland.  I wonder if this has anything to with a certain referendum.  Of course it does.  An article on this from the BBC news website can be found here.  I did find it amusing that the position ends shortly after the proposed referendum date.  I should not be so cynical.  It is good that HM Treasury is going to try and find someone to appease the natives.  I suspect they have run out of gunboats. 

Now to HMRC.  HMRC is clearly under strain.  In addition to having to deal with numerous devolution issues its budget is being reduced by 15% whilst having to increase tax revenues brought in by compliance activity by £7bn per year by 2014/15.  Not surprisingly HMRC staff have begun “working to rule” to highlight ‘problems caused by the job and budget cuts. 

I was also interested to see that HMRC has published a draft code of governance for resolving tax disputes.  This follows the controversy surrounding some corporate tax disputes of which it was accused of agreeing over-generous resolutions.  An article on this issue can be found here.  

Clearly the UK Government is keen to show it is clamping down on tax evasion.  HMRC has paid out more than £1m in rewards to tax evasion informants since the start of the financial crisis.  An article on this can be found here.  And just to reinforce the point HMRC has published its rogues gallery of tax evaders and fraudsters.  An article on this from the BBC news website can be found here.

Now to an issue I have blogged on recently.  The Office of the Scottish Charity Regulator is reportedly to investigate 50 private schools to see if they meet the “benefit to the public” criteria in order to maintain their charitable status.  An article on this from the Sunday Herald can be found here.  This is an issue that still needs to properly debated.     

Now to the strange world of caravans and an article from the Herald.  It seems that a little-known tax loophole is set to cost Scotland’s councils millions of pounds a year in revenue.  Each caravan in a caravan park can apply for rates relief, which in turn cuts the overall bill for the park considerably.  It seems that few people knew about this loophole until the owners of caravans in the Rosneath Castle Caravan Park, near Helensburgh, first began using it. The 300 caravan owners at the park have now bombarded the Clydebank business ratings assessors’ office with letters and phone calls, each seeking to save a few hundred pounds per year in council rates.  The article from the Herald can be found here. 

Now to the USA and news that the Democrats are split over estate tax reform.  Democratic Party members of the US Senate have rejected President Obama’s proposal for a 45% top rate of federal estate tax on individual estates worth more than $3.5m.  The tax will rise sharply at the end of this year if Congress fails to agree on reform.  An article on this from Bloomberg can be found here.

Tax is also an issue in the Presidential election.  The Democrats have succeeded in turning the finances of Republican presidential candidate Mitt Romney into a lead news story.  Pressure is growing on Romney to reveal tax returns.  There are accusations that he failed to disclose a Swiss bank account, and even that he participated in the US Internal Revenue Service’s 2009 offshore tax amnesty.  An article on this from Forbes can be found here.

Let’s finish with an old favourite.  It seems that there have been some financial transaction tax stirrings in both Korea and France.  In order to bring the taxation of derivatives in line with other earned income and introduce another revenue source, the Korean Government has announced plans to impose a transaction tax on index options and futures.  France has also partially implanted its own financial transaction tax.  Although a small start, covering only shares in larger companies, and at 0.2%, it’s still lower than UK stamp duty on which it is modelled. Articles on the Korean proposal can be found here and the French proposal here.

Have a good weekend.

Where to start?  I think I will start with the Scottish Futures Trust.  I remember well the negative reaction to the SFT when it was first proposed.  The coverage the SFT has received this week shows how much things have changed.  The fact that the long term costs of PFI are now widely known also shows how good an idea the SFT was.  A report on this from the BBC news website can be found here.

This raises another issue.  Notwithstanding the fiscal powers debate it is clear Scotland is increasingly doing things its own way.  On areas such as health or education the differences are well documented.  Now Scotland is to have its own food standards agency and a new governing body for the Scottish canals.  This is not because of Calman or the Scotland Act but because of the actions of the UK Government.  Add to this the Revenue Scotland announcement and you see the direction in which things are moving.

Now to a subject I have written about before, the Crown Estate.  It is now difficult to find someone against devolving control over the Crown Estate in Scotland to the Scottish Parliament other than the present UK Government.  If the UK Government is not even willing to cede control over this body to the Scottish Parliament then it is easy to accuse them of not seriously engaging in the fiscal powers debate.  A report on the latest ploy by the UK Government to not devolve control of the Crown Estate to the Scottish Parliament can be found here.

Now to the UK Government’s so called “Heritage tax”.  “The Heritage Alliance is disappointed that the UK Government has refused – despite widespread opposition and strong challenges to the rigour of its evidence base – to reconsider its Budget proposal to remove zero rating of VAT on approved alterations to listed buildings.”  No sign yet of a u-turn on this proposal.  More on this can be found here.

The Sunday Times recently reported that Scottish Government advisor Dr Andrew Cameron has advised that a tax break, which would allow wealthy landowners and investors to plant trees in exchange for tax offsets, would help Scotland meet its forest coverage goals. That would of course require further tax powers to be devolved if this was to be just a Scottish tax relief.  Let’s also not forget that the last attempt at something like this was a complete shambles.  Hopefully if this idea is revisited lessons will have been learned.  A story on this issue from 2002 can be found here.

Now to the “shared services” debate.  The House of Commons Public Accounts Committee has found that a Whitehall scheme to share resources across departments has cost hundreds of millions of pounds more than it saved.  The scheme ran £500 million over budget, costing £1.4 billion, and of the five departments that took part, only one broke even.  A report on this from the Telegraph can be found here.  Sadly I am not surprised with this report.

Aggregates Levy is one of two other miscellaneous taxes recommended for devolving to the Scottish Parliament under the Calman Commission.  The other being Air Passenger Duty.  The UK Government has so far resisted devolving Aggregates Levy due to a European Court action by the British Aggregates Association.  An update on this from HMRC can be found here.  The UK Government are fast running out of excuses for not devolving Aggregates Levy.

I was not surprised to read that many elderly farmers are working long past retirement age because they fear losing agricultural property relief (APR).  APR is likely to reduce their liability to inheritance tax.  Their worries have been prompted by HMRC’s tactics of challenging APR on farmhouses at every opportunity.  A report on this from the STEP journal can be found here.

Now to matters slightly further afield.

The European Commission’s Brussels IV proposal to simplify the settlement of international successions has received the final backing of the European Union’s Council of Justice Ministers.  The regulation will come into force in 2015 and will apply directly in all member states, other than Denmark and the opting-out members UK and Ireland.  Hopefully this is something that the UK and Ireland will consider again in the near future.  A report on this from the European Commission can be found here.

Now to France.  As expected, France’s new Socialist government has announced a series of increases in personal and business taxation.  They include new wealth taxes and a tax on foreign owners of holiday homes.  A similar idea was floated last year by the Sarkozy administration but it was dropped when the French Government was advised that such a tax would not survive a challenge under European Union anti-discrimination legislation. Hollande may believe he can avoid this by calling the levy a “social charge” rather than a tax.  A report on this from the STEP journal can be found here.

The New York Times has published an article describing just how easy it is to set up a Delaware shell company without disclosing its beneficial ownership.  This is something that the US Government has regularly pilloried many other countries for.  Apparently Delaware has more corporate entities than people.  The article from the New York Times can be found here.

A Berkshire man has been convicted of evading £430,000 inheritance tax on a Swiss bank account he held jointly with his mother.  HMRC obtained Michael Shanly’s account details from the French authorities, who had bought them from a former employee of HSBC Geneva, who had stolen them from the bank.  This is a good example of the increasing co-operation between European countries and the increasing effectiveness of HMRC.  A report on this from the BBC news website can be found here.

Australia has introduced its highly controversial carbon tax, after years of bitter political wrangling.  The law forces about 300 of the worst-polluting firms to pay a A$23 (£15; $24) levy for every tonne of greenhouse gases they produce.  The Australian Government says the tax is needed to meet climate-change obligations of Australia – the highest emitter per-head in the developed world.  A report on this from the BBC news website can be found here.  The environmental taxation debate in the UK, in contrast, has slipped down the political agenda over the last few years.

I think I will end with Cyprus.  The Cyprus government will not agree to cut its 10% corporation tax rate in order to secure a European rescue of its banking sector and public finances.  Cyprus may though have to agree to a further VAT increase as part of these negotiations.  Cyprus is taking a similar stance to the one taken by Ireland over the last couple of years.  A report on this can be found here.

Have a good weekend.