Another week in “tax land”

I think I will start with VAT and the proposed new Scottish national police force.

It was reported this week that the proposed new Scottish police force may face an annual VAT bill of £22 million.  Under the current structure police forces are treated like local authorities and are exempt from VAT.  However if they merge they may be subject to VAT.  The Scottish Government is currently in talks with HM Treasury to eliminate or minimise this potential financial liability.

I suspect that the Northern Ireland police force will be mentioned during these talks and in particular the fact that it has VAT exempt status.   So what is the problem you might ask.  The same exempt status will surely apply to the new Scottish police force.

The “just because it happens in Northern Ireland” argument does not always work with HMRC and HM Treasury.  Northern Ireland already has borrowing  and welfare powers.  Anyone involved in the Scotland Bill deliberations knows how hard HMRC and HM Treasury resisted calls for borrowing powers to be included.  They succeeded in ensuring that only restricted powers were included.  Welfare powers were not even seriously considered.  Northern Ireland is also to get partial control over air passenger duty and also possibly corporation tax.

In addition it seems that HMRC and HM Treasury cannot help but react negatively to any policy proposed by the Scottish Parliament that deviates from or impinges on reserved matters.  Examples include free personal and nursing care, local income tax, the Scottish Futures Trust and minimum alcohol pricing.  A report from the BBC news website on this issue can be found here.

Now to a surprise cut in council tax.  Stirling Council has become the only local authority in Scotland to reduce its council tax after councillors passed a budget on their second attempt.  The 1% cut, effective from 1 April, will see Band D council tax go down £12 from £1,209 to £1,197 a year.  Labour and Conservative councillors voted the measure through in an “alternative” budget after rejecting the minority SNP administration’s proposals.  More on this can be found on a BBC news website report which can be found here.

An article from the Evening News reports that The City of Edinburgh Council wants to investigate the idea of creating a “business improvement district” for Edinburgh’s tourism industry.  This would involve businesses making contributions to promote the city.  The article from the Evening News can be found here.  This is the latest in a series of revenue raising ideas from Edinburgh Council and of which I have written about previously.  See for example my blog of 9 December 2011.

Now to the fiscal powers debate and the latest group to enter the fray.  “Devo Plus” is a creation of the think tank Reform Scotland.  I should declare an interest as a former trustee of Reform Scotland and one of the authors of Reform Scotland’s “Devolution plus” fiscal powers paper.  I am though not involved in this campaign.  The position taken by the Devo Plus group is that they are opposed to “devo max” and independence and do not think the Scotland Bill goes far enough.  Instead they argue that the Scottish Parliament should be able to raise an amount roughly equal to what it is responsible for spending.  VAT and national insurance would remain in the hands of HM Treasury to ensure that Westminster was also accountable for its spending in Scotland.  It will be interesting to see what impact this campaign has in the coming weeks.  More on Devo Plus can be found here.

Now to the debate over the top rate of income tax.  Those arguing for the abolition of the top rate of income tax will be analysing preliminary UK Government statistics which suggest that the 50 per cent top rate of income tax has not raised any extra revenue.  A press release from Grant Thornton on this can be found here.

The “fuel duty discount pilot scheme for remote island communities” comes into operation today.  I was not surprised to see a report on the BBC news website of how HM Treasury had warned oil suppliers against attempting to profiteer from this scheme.  The report also notes that over the past week rises in the cost of fuel supplied to Orkney, Shetland and the Western Isles have been greater than the proposed discount.  Petrol and diesel at island pumps can be 20p more expensive than mainland prices.  I also read this week that the UK has the highest fuel tax burden in Europe with 60 per cent of the cost of unleaded petrol and 58 per cent of diesel made up of fuel duty and VAT.  I will resist the urge to make an ironic comment about North Sea oil.  The BBC news website report can be found here.

The BBC has reported that Barclays Bank has been ordered by HM Treasury to pay half a billion pounds in tax which it had tried to avoid.  Barclays was accused by HMRC of designing and using two schemes that were intended to avoid substantial amounts of tax.  The schemes, described as “highly abusive”, enabled the bank in question to avoid paying corporation tax on the profits it made from buying back its own debts, and to reclaim tax credits from HMRC on certain investment funds. The BBC website news report can be found here.

Now to a good idea.  A new “Assurance Commissioner” is to be appointed by HMRC following criticism from the House of Commons Public Accounts Select Committee about the relationship between HMRC and big businesses.  The following is from an article in the Telegraph and nicely sums up this matter: “In a move that amounts to a humbling mea culpa, HMRC is set to admit it needs to improve “transparency, scrutiny and accountability” after being publicly lambasted by the Parliamentary Public Acounts Committee over deals with Goldman Sachs and Vodafone.”  The article from the Telegraph can be found here.

I think I will end with France.  I will resist the urge to talk about last weekend’s game and instead mention a report by Reuters.  According to Reuters there has been a sudden rise in the number of French residents asking their wealth advisers about tax exile. They fear that the socialist party’s candidate Francois Hollande may win the forthcoming presidential election and increase wealth taxes.  I have heard similar claims many times before.  I have often wondered how many people actually leave.  I suspect not that many and, of those who leave, many regret doing so.

Have a good weekend.

Comments Off

Scottish Budget week in “tax land”

Yesterday saw John Swinney, Scotland’s Finance Secretary, give his first Spending Review (for Spending Review think Budget) of the first term of the new Scottish Parliament.  John Swinney made a number of tax related announcements.

The announcement that made most of the headlines was the proposal for a new public health levy.  A choice of words to be followed depending it seems on whether you agree with the proposal.  This proposal is similar to the proposal in the last Scottish Parliament that was dubbed “tesco tax”.  That proposal failed as the then Scottish Government did not have a majority.   That is of course not an issue for the present Scottish Government.   The levy will be a business rates supplement paid by large retailers of both tobacco and alcohol from April 2012.

Although not given as much publicity as the above levy, Mr Swinney also confirmed funding for the freezing of the Council Tax for the next 5 years.  It will be interesting to see how Scotland’s local authorities react to this policy in the months leading up to next May’s local elections.

A proposal that has received less attention, but nonetheless and in its own way may be just as important as the other proposals, is the commitment to introduce legislation to reform “empty property relief” from April 2013.  The aim is to support regeneration and introduce incentives to reduce empty shops in town centres.

The top rate of income tax debate continues with the first sign that the Liberal Democrats are not at one on this issue.  David Laws, former Chief Secretary to the UK Treasury albeit a short lived one, said that he saw the 50p top rate as a temporary measure.  That is the position being taken by most Conservatives on this issue.

Some good news for those proposing a fuel duty discount.  On Wednesday the UK Government said that the European Commission had agreed that rates of taxation on petrol and diesel could be reduced as proposed.   The scheme will cover the Inner and Outer Hebrides, the Northern Isles, islands in the Clyde and the Isles of Scilly.  No date has yet been set for the commencement of this scheme.  An interesting story from the BBC on reaction to this announcement can be found here.

I read with great interest of how the ex-boss of Marks and Spencer Sir Stuart Rose has said in an interview that he would be prepared to pay more than the current top rate of tax.  This follows similar statements by business leaders in other countries including France, Italy and the USA and including billionaire investor Warren Buffett.  Indeed a proposal by President Obama to increase taxes on America’s wealthiest have been dubbed the “Buffet Rule”.  I wonder how many others will follow the position taken by Sir Stuart Rose.

Comments Off