Let’s start with my favourite Chicago politician and the small matter of the next US Presidential election.

I was interested to read this week that President Obama is considering a form of “minimum taxation”.   The plan seems to be if you make more than $1 million a year you should not pay less than 30 per cent in taxes.  In addition if you earn more than $1 million a year you will not be allowed to claim any tax relief or deductions.  On corporate taxation no American company will be allowed to avoid paying its “fair” share of taxes by moving jobs and profits overseas.  Again multinational companies will be liable for a basic minimum tax.  I wonder if we will see our politicians thinking along similar lines in the near future.  I suspect that we will.

Now to the independence and fiscal powers debate.  Two major developments this week. Firstly sources close to the Prime Minister are reported to have said: “that a substantial increase in financial powers for Holyrood is not an option if Scotland wants to remain within the United Kingdom.”  If the UK Conservative party sticks with this line in the sand then how will those who support “devo max” or “devo plus” vote in 2014?  Will the Liberal Democrats and the main UK opposition party continue to support this policy?

Only time will tell as far as these questions are concerned.  One thing is though certain and that is the UK Government will face opposition on this point.  This week groups from the voluntary sector, churches, trade unions and the business community have formed a coalition to explore the possibility of a “middle-ground” option which is short of independence.  This group is termed “civic Scotland” and has the support of two think tanks Reform Scotland and the Centre for Public Policy.  For completeness sake I should mention that I am a former trustee of Reform Scotland and that I was one of the authors of Reform Scotland’s fiscal power papers.  I am though not involved with this group.

I was surprised that more was not made of the new statistics produced by HMRC this week.  UK tax receipts up to January 2012 show that total tax revenues in the 2010-11 fiscal year very nearly recovered to their pre-recession 2007-08 level and are set to be substantially higher in the current 2011-12 tax year.

Now to something we in Scotland are going to have to consider as tax powers are devolved to the Scottish Parliament.  It is easy to suggest a new tax.  Recent examples include a “bed tax” for Edinburgh.  Another possible new tax is the so called “bag tax”.  It was reported this week that Northern Ireland is to introduce such a tax from April.  Wales introduced a similar tax last year and the Republic of Ireland has had such a tax since 2002.  The Scottish Government is presently consulting on this issue.

As I said it is easy to suggest a new tax.  It is harder to explain what that tax is meant to achieve.  That should always be the starting point.  Are we looking to increase tax revenue or change behaviour or possibly a bit of both?  When environmental taxes such as aggregates levy and landfill tax were introduced the politicians struggled to answer this question.

I would also expect an explanation as to how the tax will be collected, the cost of collection and who carries that cost.  Any claim as to potential revenue also needs to be looked at closely and also put into context.  Most taxation revenue comes from just a handful of taxes.  Many of the UK’s minor taxes produce a relatively small amount of revenue.

Any new tax should also have a review date.  This ensures that any claims as to revenue or the cost of administration can be checked within a relatively short period of time.

Now to an update in the Scotsman on Edinburgh airport’s so called “kiss and fly” tax.  A total of 15p of every £1 generated by the charge for dropping off passengers beside the airport terminal is being channelled into its environmental fund.  The article can be found here.

Now to business rates and an excellent piece in the Scotsman newspaper.  The Scotsman reports that an unprecedented number of firms in Edinburgh have demanded reduced business rates as they struggle with a weak global economy and local difficulties such as tram works.  The article can be found here.

Now to Europe.  I was not surprised that President Sarkozy has decided to introduce a French financial transaction tax in August.  Will he still be in power then is of course another question.  The plan is to unilaterally impose a 0.1% tax on financial transactions.  The UK Prime Minister’s reaction was as expected.  Of greater interest is whether other European countries follow Sarkozy’s lead.

I have been following the Harry Redknapp trial with interest.  It is alleged that he received undeclared payments via a Monaco bank account from his former boss at Portsmouth Football Club.  Reports such as this one from the BBC News website, found here, make fascinating reading.

It seems that the Chief Executive of the Student Loan Company has his salary of £182,000 salary paid via a company and without tax being deducted.  The article claims that both HMRC and HM Treasury were aware of this arrangement which allows Ed Lester to pay corporation tax of 21% rather than up to 50% income tax on his earnings.  You have to wonder if the people who approved this arrangement have any sense of what is happening in the real world just now.  This is an excellent piece of journalism from the Guardian and the article can be found here.

Finally to more serious matters.  Good luck to new Scottish captain Ross Ford this weekend.  No pressure!

Have a good weekend.

Given that I am working in Dundee this week this seems like the best place to start.  Dundee is also my favourite Scottish city.  The plans for the town centre and the waterfront are very impressive.

So why is Dundee in the news this week?  Scottish Finance secretary John Swinney named a series of “hubs” where incentives will be offered to companies in manufacturing, life sciences and low carbon renewable energy.   The ports of Dundee and Leith is one of two low carbon and renewables areas proposed.   A number of questions remain to be answered including what are these “incentives”.  For example a reduction in business rates?  The announcement from the Scottish Government can be found here.

Also on business rates. The Scottish Chambers of Commerce called for the planned rise in business rates to be reconsidered.  The rate is planned to rise by 5.6% in April with the figure based on last September’s inflation rate.  This week saw the CPI rate of inflation fall to 4.2%.

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.

Two new beer duties are to be introduced by the UK Government from 1 October 2011.

More information can be found here.

A week that saw HMRC step up pressure on Rangers FC, calls for a tax on “junk food” in The Lancet and reports on how Bonn uses a  meter to tax its prostitutes.  I did like the argument put forward against the use of this meter by a prostitutes’ rights activist: “double taxation”.

The Liberal Democrats are making almost all of the running on tax ideas and policy just now.  The debate, for debate read argument, over whether to retain the present top rate of income tax and/or introduce a “mansion tax” continues between the partners in the UK coalition government.  In addition the Liberals are calling for a proper examination of how a “land tax” might work.

Attendees of last night’s annual CBI Scotland dinner heard, in between the odd constitutional reference, its UK President Sir Roger Carr, criticise the UK’s “punitive” tax regime and HM Treasury’s “misguided” levy on North Sea oil production.

Not surprised to hear of HMRC’s role in the “Mortgage Verification Scheme” and that it is to start scaling back its “time to pay policy”.  That is a scheme that allows a businesses additional time to pay its tax bill.

Surprised that those calling for a reduced rate of VAT on home repairs and renovations are not making more use of the fact that the Isle of Man has negotiated such an agreement with HM Treasury.

Not a dull week.

In my fourth article in this series I am looking at the UK Government’s decision to withhold Attendance Allowance funding when the then Scottish Executive decided to introduce its policy of Free Personal and Nursing Care (FPNC).

First thing’s first.  What is Attendance Allowance?.  Attendance Allowance is a tax-free benefit.  You may get Attendance Allowance if you’re aged 65 or over and need help with personal care because you’re physically or mentally disabled.

A reminder of what the 2007 Sutherland review of FPNC recommended on this issue:

“Address imbalance in funding streams.  The UK Government should not have withdrawn the Attendance Allowance funding in respect of self-funding clients in care homes, currently amounting to £30 million a year.  That funding should be reinstated in the short-term while longer-term work to re-assess funding streams takes place.”

When researching this issue I also found an interesting article by the economists, Jim and Margaret Cuthbert.  The main point of this article is that the Department for Work and Pensions (DWP) and HM Treasury breached their own rules in coming to this decision.  The full article can be found here.

The decision to withhold Attendance Allowance funding appears to have more to do with not understanding that devolution means the power and ability to do things differently.  When you consider the reaction to other proposals such as a local income tax or the devolving of corporation tax powers a pattern appears to be forming.   It is also worth noting that institutions such as DWP and HM Treasury are meant to act for the whole of the UK.

Interested to see that this campaign resurfaced this week.

Main protagonists appear to be the Scottish Building Federation, Federation of Small Businesses and the Scottish Government.

I was though surprised to see no reference to the Isle of Man when this was being reported.  This was because the Isle of Man reached an agreement with HM Treasury last December to make permanent its 5% VAT rate on repairs or refurbishment of domestic property.

More information on this can be found here.   An article on this from the Scotsman can also be found here.

The Herald reports today that various English airport authorities are not happy that Air Passenger Duty is likely to be devolved to the Scottish Parliament.

This reaction is not unexpected.  I suspect that each time a tax is devolved similar arguments will be made.   This debate is not unique to the UK.  The on-going battle of wills between Ireland and France and Germany over Ireland’s low corporation tax rate shows its European dimension.

The Herald also reports that one option being considered is to simply devolve the right to collect this tax but not vary it.   I suspect that is not a serious proposal as only devolving the right to collect a tax does not make the Scottish Parliament more fiscally accountable nor provide it with a new economic lever.   If this is a serious proposal then it shows how hard it is going to be devolve any new tax or fiscal power to the Scottish Parliament.  Air Passenger Duty is a minor tax and in theory is fairly easy to devolve.  Even the Calman Commission recommended that it be devolved.  Last week’s Crown Estate announcement provides further evidence of how reluctant HM Treasury are to give up any power at all.

The report from the Herald can be found here.

This is an issue that has been gaining an increasing amount of coverage over the last few years.

The House of Commons Treasury Committee are also looking at this issue.

The Chartered Institution of Taxation have published a report of a recent Treasury Committee hearing on this issue.  It seems that there is general agreement as to the existence of the “tax gap”.  There is as yet no agreement on how we go about measuring it or how to reduce it.

The CIOT report on this can be found here.