A fascinating time in “tax land”

Where to start?  There is so much happening just now it is difficult to keep up.  It is though a fascinating time to be living in Scotland.

The signing of the Edinburgh Agreement ends the “phoney war”.  So besides this historic agreement what else has been happening?

Let’s start with the publication of the report by the Liberal Democrats Home Rule Commission.   The report can be found here.  There are a number of problems with this report.  The first is the likelihood of the Liberals being part of and having a major influence in a future UK Government.  At best the Liberals will form part of a UK coalition government where they will be a junior partner.  Even if they were to persuade the senior party to implement their plans the Scottish Parliament would not see any new powers until at best 2020.

Then there is the accusation: why should anyone take the Liberal Democrats seriously on tax and fiscal powers?  The Liberal Democrats are in power just now and all we have is “Calman minus”.  They are not even devolving control over the Crown Estate in Scotland and that is party policy.

Then there is the report itself.  The report barely goes beyond Calman.  Inheritance tax is to be devolved and also some parts of capital gains tax.  This report does not even go as far as their last fiscal powers report, the “Steel Commission”.

One last point.  It must be remembered that the Liberals have historically been willing to go further than the other main UK parties on devolving power to Scotland and the Scottish Parliament.  The Steel Commission report provides evidence for this argument.  What their latest report shows is that the Liberals are moving away from devolving serious tax and fiscal powers to the Scottish Parliament.  That is disappointing and makes you wonder.  If this is all the Liberal Democrats are offering what will Labour or the Conservatives come up with?

The answer to that question is likely to be not much.  Johann Lamont has finally announced the membership of her “further devolution commission”.  What is the likelihood of this commission coming up with a proposal close to “devo max” or even “devo plus”?  Almost none.  Why?  Remember the struggle to persuade the Labour party to legislate the Calman proposals.  Think of how few powers are contained in the Scotland Act.  Think of the reaction to senior Labour party members to any call for further tax and fiscal powers to be transferred to the Scottish Parliament. Think of Alistair Darling’s recent comments and in fact of any Labour MP who talks on this subject.  An article from the BBC news website on the Labour party’s commission can be found here.

Then there is the Conservative party.  It is clear that most Conservatives see the European Union debate as the main debate.  Scotland is but a side show.  The idea of a “Constitutional Convention” is laughable.  It simply means, let’s kick this matter into the longest of long grass for another generation.  Ruth Davidson has already got her retaliation in first and stated that corporation tax or welfare powers should not be devolved.  In any case, this convention won’t even see the light of day in any meaningful way until after the referendum.  Does anyone actually believe that the Conservatives will even consider any further powers for the Scottish Parliament if Scotland votes No?

Staying with the Conservatives, Boris Johnson, the Mayor of London, seems to be everywhere these days.  That includes arguing for greater powers for the London Assembly.  Johnson has asked George Osborne, the UK Chancellor of the Exchequer, for London to be allowed to retain any stamp duty raised on property sales.  Johnson argued that London inhabitants face higher tax rates than households elsewhere in the UK, and would use the taxes to fund house building and regeneration schemes.  More on this from the Telegraph can be found here.

The BBC is to offer staff contracts to some of its biggest names in a U-turn after months of accusations that it is enabling tax avoidance.  It is claimed that up to 25,000 people employed at the BBC do not pay tax at source.  More on the U-turn by the BBC can be found here and on the background to this story here.

I was interested to see that the Labour party at its recent conference proposed to reinstate the 50% top rate of income tax and apply a two year suspension of stamp duty on properties worth less than £250,000.  I wonder if they realize that these will be matters for the Scottish Parliament to decide as a result of the Scotland Act by the time the next UK general election takes place.

The UK Government is seemingly intensifying its attack on tax planning by corporations and wealthy individuals.  Extra measures include a 50% expansion of HMRC’s High Net Worth Unit, more resources for the Liechtenstein Disclosure Facility and a new policy of refusing to award government contracts to companies that use “aggressive tax avoidance” schemes.  More on this from HM Treasury can be found here.  When thinking about this it is worth also reading about Starbucks.  Two House of Commons committees are due to question tax officials about how Starbucks has been able to avoid paying tax on £1.2bn of sales since 2009.  More on this from the Guardian can be found here.

Plans put forward to add an additional fee to visitors’ hotel bills have been abandoned by the City of Edinburgh Council in response to objections from business leaders.  The Council planned to reduce its spending on festivals, events and promotional initiatives by setting up a “transient visitor levy”, aimed at raising more than £3m a year.  More on this from the Scotsman can be found here.

The McLaren Formula One team have successfully argued that a £32m fine they paid after a 2007 Ferrari spying controversy should be tax deductible.  McLaren had argued the fine was not a statutory penalty but one incurred under Formula One rules, making the fine a business expense.  HMRC disagreed but a tax tribunal has found in favour of McLaren.  More on this from the Telegraph can be found here.

Now to an old favourite, a Financial Transactions Tax.  European Union Tax Commissioner Algirdas Semeta says he is now sure there are enough Member States to force through an EU wide Financial Transactions Tax. Portugal, Italy, Greece, Spain, Germany, France, Belgium, Austria, Slovenia, Estonia and Slovakia have committed to this new source of new revenue.  A press release from the European Commission on this can be found here.  The UK Government has also confirmed its opposition to a Financial Transactions Tax.  More on the UK Government’s stance can be found here.  This issue provides further evidence of the growing disengagement with the European Union by the UK Government.

Germany’s Roman Catholics are to be denied the right to Holy Communion or religious burial if they stop paying a special church tax.  Can you imagine this happening in Scotland?  An article from the BBC news website on this can be found here.

The French Government is to revise its 2013 Budget proposal to raise the entrepreneurs’ rate of capital gains tax on equities from 19% to 45%.  The retreat follows a campaign against the tax by an organised group of business owners called Les Pigeons (‘The Mugs’ or ‘Suckers’).   An article on this from Reuters can be found here.

Let’s end with a story from America.  It seems that Chinese immigrants are less keen on an American passport.  Citizens of the People’s Republic of China who emigrate to America used to apply for US citizenship as a matter of course, but now America’s  world wide taxation policy is making some of them regret it.  An article on this story from the South China Morning Post can be found here.

 

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Another week in “tax land”

Let’s start with the latest UK coalition Government spat.  This time on Nick Clegg’s call for a “wealth tax”.  An article on this from the Herald can be found here.

The Deputy Prime Minister said: “If we are going to ask people for more sacrifices over a longer period of time, a longer period of belt tightening as a country, then we just have to make sure that people see it is being done as fairly and as progressively as possible.”  George Osborne’s response was as expected and criticised Nick Clegg’s proposal claiming that a wealth tax would drive away Britain’s wealth creators.    

There has been lots of commentary on this.  My favourite piece was by Iain MacWhirter in the Herald.  This article can be found here.  The following is from his article:

“It is astonishing that anyone still subscribes to the myth that the enrichment of the few leads to the prosperity of the many.  It just doesn’t happen.  Wealth does not “trickle down” to the rest of society from the troughs of the very rich – if anything the reverse is the case.  It is sucked up through the concentrations of asset wealth held by the top 1% in property, shares and bonds. The story of the last three decades is that the wealthy have become immensely, shockingly, incomprehensibly richer while the middle has been squeezed and the poor remain pretty much as they always have – at the bottom of the heap struggling to hold their lives together.”

The UK Government is reportedly considering creating a scheme of “mini-jobs” which would allow employees to take on work without paying tax or national insurance, in a bid to boost employment.  The scheme is modelled on a German programme under which employees can earn up to €400 a month before any tax is paid.  An article on this from the Guardian can be found here.

Now to an old favourite, MPs’ expenses.  HMRC is reportedly in a dispute with the Westminster’s expenses watchdog, the Independent Parliamentary Standards Authority, with the latter defending the right of MPs to employ accountants to fill in their expenses forms and tax returns and insisting that the cost should be tax deductible.  An article from the Guardian on this can be found here.  The article quotes some of the correspondence between the parties which makes interesting reading and suggests that MPs, or at least IPSA, has a short memory.  Taxpayers are not generally permitted a tax deduction for the costs of complying with tax law.

UK public sector borrowing reached £600m last month, leading to further criticism of the UK Government’s economic strategy.  Borrowing in the first four months of the year was £9.3bn higher than the equivalent period last year whilst there was a 20% drop in the corporation tax take, according to official figures.  An article from the Scotsman on this issue can be found here.  This is an issue which is not going away anytime soon.

“The war on the motorist is a myth and fuel taxes should be raised without delay”.  A report by the Institute of Public Policy Research, a think tank, has recommended that fuel taxes be raised and congestion charging extended.  An article on this challenging proposal from the Telegraph can be found here

The Scottish Daily Express claims that Scotland’s local authorities are set to write off more than £320m of unpaid poll tax.  For a more balanced view of what is actually happening read the article all the way through.  The article can be found here.

The UK Public Accounts Committee has urged HMRC to prosecute more people for alcohol smuggling.  HMRC estimate that £1.2bn in tax is left uncollected each year on smuggled beer and spirits, yet there have been no more than six successful prosecutions each year, in the four years to 2009-10.  An article on this from the BBC news website can be found here. Another argument for devolving control over alcohol duty to the Scottish Parliament? 

Some Italian tax inspectors are disguising themselves as holidaymakers to detect tax evaders on the crowded beaches, while others are questioning the owners of luxury yachts.  Great work if you can find it.  An article on this from the Telegraph can be found here

Riots erupted on the tranquil Greek island of Hydra after tax inspectors arrived in force to arrest shopkeepers for not issuing receipts.  Angry crowds stoned the inspectors and besieged the building in which they took refuge until riot police arrived to restore order.  An article on this from the Athens News can be found here

Now to the USA.  The US media continues to analyse the tax-planning methods used by Republican presidential candidate Mitt Romney.  More on this from the STEP Journal can be found here.    

Have a good weekend.

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A four day week in “tax land”

For those of you struggling to sleep at night, may I recommend the latest UK Finance Bill.  According to the accountants Grant Thornton, at 686 pages, it is the longest Finance Bill in UK history.  The Finance Bill can be found here.  I am reluctant to even mention the fact that the UK Government has announced 45 tax consultations in case you stop reading.

I enjoyed Jeremy Peat’s comment piece on the UK Budget.  Jeremy comments on the 50p rate of income tax, the 40% income tax band, the economy and lending.  I particularly liked this comment: “What about incentives? Well, one effect of the Budget is to drag very large numbers of folks into the 40p tax band. Logically, I would have thought the adverse effect on the incentives of this substantially larger group would be expected to be [much] greater than any positive incentive effect from reducing the top rate to 45p for a much smaller group.”  If you are registered with the Herald website you can find all of Jeremy’s article here.

Now to the fiscal powers debate Italian style.  It is claimed that Italy’s prosperous German speaking South Tyrol autonomous province wishes to buy its financial independence.  South Tyrol has a population of around half a million and already has a large amount of autonomy. Up to 90% of tax revenue stays in the region, while the other 10% goes to Rome.  South Tyrol was occupied by Italy at the end of the WWI and annexed in 1919.  After WW2 the Allies decided that the province would remain a part of Italy, but would be granted a large amount of autonomy.  The article that I came across on Twitter can be found here.

“Devo max” for London?  An interesting article from the London Evening Standard can be found here.  I am surprised that Boris Johnson has not made more of an issue of this before now.

Last week I mentioned the report by the David Hume Institute on the debts and liabilities that an independent Scotland may be responsible for.  The report also made reference to the fact that the UK has approximately £821bn of “assets”.  I was glad to see that the “asset” side to the fiscal powers debate continued this week.  An article in the Scotsman on this issue by Jennifer Dempsie can be found here.

It seems that any new charge is automatically labelled a “tax”. My first example is from Dundee and a so called “tax on creativity”.  Members of Dundee’s licensing committee have decided to postpone implementing a controversial act that it is claimed could hinder the city’s arts scene.  The rule would have required exhibitions or public shows put on by the artists, gallery owners, musicians or publishers to be licensed from 1 April, even if they were free.  With the cost of a licence ranging from £124 to £7,500, artists said many free shows and exhibitions would simply not take place. The background to this is the Criminal Justice and Licensing (Scotland) Act 2010.  An article from the Courier on this can be found here.

My second example has been termed a “property extension tax” by the Daily Mail.  The Mail reported this week on how planning permission fees for property extensions will increase from £160 to £300 in Scotland.  The Mail compared this with the £150 charge in many English local authorities.

Now to the unsurprising news that charities have banded together to protest at the capping of donor tax relief that was announced by George Osborne in his Budget statement.  Two leading umbrella bodies, the National Council for Voluntary Organisations and the Charities Aid Foundation, have set up a website calling on Osborne to exclude charities from the proposed cap.  More than 200 organisations have already signed up to support the campaign, called “Give It Back George”.  Principals of five Scottish universities are among those signatories to a letter asking the UK Government to abandon this proposal.  The campaign website can be found here.  An article on this from the Scotsman can be found here.

An article in the Herald claims that this week’s 8% rise in Air Passenger Duty (APD) will lead to a 46% growth in HM Treasury’s revenue from APD by 2016.  It does seem that APD makes the news every week.  The reason for that is how APD is at the centre of a number of debates.  The airline industry would like to see it abolished or at least reduced.  Then there is the call for it to be devolved to the Scottish Parliament.  The UK Government has already signalled its intention to partially devolve APD to Northern Ireland.  Worth also noting that until recently the environment would be mentioned in the context of APD.  That though now rarely happens.  How quickly things change.  An article from the BBC news website can be found here.  If you are registered with the Herald website an article on APD can be found here.

The Guardian reports that the House of Lords Financial and Economic Affairs Committee has warned against the planned European Union financial transaction tax.  That is not a surprise.  What is interesting about this article is that it covers a possible alternative to the proposed financial transaction tax.  The alternative is the introduction of national stamp duties on share transactions, which the UK already has and which France is set to follow in August.  The Guardian article can be found here.

Now to Ireland and news that almost half of Ireland’s 1.6 million households have refused to register to pay the new €100 annual tax on residential property by the 31 March deadline.  The mass non-compliance was organised through an Internet campaign and backed by protest marches.  The levy, which also applies to foreign owners, is expected to rise sharply next year.  A report on this from the Irish Times can be found here.

Swiss authorities have issued warrants for the arrest of three German tax inspectors.  The three are accused of buying a CD containing bank client data stolen from Credit Suisse in Zurich, which led to the investigation of hundreds of German taxpayers with undeclared Swiss accounts.  The Prime Minister of North-Rhine-Westphalia has come to the defence of the tax inspectors and has said that the tax inspectors were only doing their duty.  Given the escalating war of words between these countries in this issue, I suspect that this matter will run for a while yet.  A report from Spiegel online can be found here.

Good luck to Edinburgh Rugby this weekend and also to those competing at the new look Gala RFC sevens.  I wonder if any politicians will be pictured eating hot pasties or sausage rolls at these events.  Have a good Easter weekend.

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