Another few weeks in “tax land”

There are signs that the quality of the Scottish independence debate is at last improving.  The ‘NO’ campaign’s relentless negativity is now being commented on and it is also being asked questions concerning what happens if Scotland votes ‘NO’.  The ‘YES’ campaign also seems to be finding its feet and the Scottish Government has published a number of detailed policy papers.  It is though it’s “White Paper” that is eagerly anticipated.    

Further evidence for this improvement comes from the Law Society of Scotland.  The Law Society published its paper titled: “Scotland’s Constitutional Future Views, opinions and questions” this week.  The paper can be found here.  This is an excellent contribution to the debate and asks questions of both sides.

In particular I liked its comments surrounding Scotland’s membership of the European Union.  It is quite obvious to anyone but the most one-eyed commentator that it is going to be very difficult to get more clarity on this issue without the cooperation of the UK Government.  It seems, and for purely political reasons, that the UK Government does not want clarity on this issue.

The following quote from the paper is also telling: “Scotland, as part of the United Kingdom, complies with the European Union treaties and the EU acquis ((all the EU laws, treaties, declarations and resolutions, international agreements and the decisions of the European Court of Justice, i.e. Europe as it is). Whether by way of accession or amendment to the treaties following negotiation, Scotland should be able to qualify, in legal terms, for EU membership in its own right.”  I was also pleased to see that Sir David Edward’s (a former judge of the European Court of Justice and one of the foremost European lawyers in Scotland) common sense analysis of this issue being quoted.

As someone who spent a great deal of time researching and writing about the options for the devolving of substantial tax and fiscal powers to the Scottish Parliament, I was also very pleased to see the ‘NO’ campaign being asked some basic questions such as “which powers” and “when” if Scotland votes ‘NO’.

Now to Wales.  It seems that the UK Government is going to consult again on whether control of SDLT is to be devolved to the Welsh Parliament.  The following story on this from the BBC website shows the increasing frustration at the UK Government’s continued delaying tactics.  The reality is that Westminster only devolves power as a matter of last resort.  All the usual tactics are being used here and in particular the need for yet another consultation.  The latest consultation can be found here and the report from the BBC news website can be found here.

Let’s now take a minute and compare and contrast the next few stories.

An independent Scotland would offer tax incentives to film and TV productions according to Scotland’s Culture Secretary Fiona Hyslop.  More on this can be found here.

The Scottish Government has condemned a High Court decision that ruled applying a cap on housing benefits for disabled people lawful.  Firstly it would be helpful if the news reports explained or clearly stated that this was the “High Court” of England & Wales.  That said, Scottish Housing Minister Margaret Burgess has demanded, and it seems has had some success, that Scotland gets a fair share of the £35m funding pot set aside for those hardest hit. 

Interestingly she also said:  “The bedroom tax will hit the poorest hardest and it is wrong that it applies to people in crisis such as those in temporary accommodation and some supported accommodation.”  “Scotland is disproportionately disadvantaged because much of Scotland’s temporary accommodation is affected by the bedroom tax, unlike in England. The majority of our temporary accommodation is local authority owned, which is not the case in England.”  That begs the question:  Would a Scottish court have come to a different decision?  More on this can be found here.

The UK Government has outlined plans to give tax breaks to companies involved in the UK’s nascent shale gas industry.  It has proposed cutting the tax on some of the income generated from producing shale gas – found in underground shale rock formations – from 62% to just 30%.  This proposal has been criticised by environmentalists, with Friends of the Earth calling them a “disgrace”.  Just how generous are these tax breaks? Gas production is typically taxed at 62% although in some parts of the North Sea long standing operations are taxed at up to 81%.  More on this from the BBC news website can be found here.

Sometimes you have to wonder if Scotland exists.  Will the so-called “Mansion Tax” apply to Scotland?  No.  Do almost all the news stories refer to “Britain”?  Of course they do.  See for example this one from the Independent which can be found here.

11 of the 22 high-value settlements reached by HMRC last year were considered inadequate by the Tax Assurance Commissioner’s office, according to its first annual report. The office was created in February 2012 in response to criticisms of HMRC’s handling of big-money tax disputes.  More on this from Pinsent Masons can be found here.

Now to matters slightly further afield. 

Jersey fights back?  A report commissioned by Jersey Finance has found that Jersey helps the UK generate £2.3bn in tax revenues each year and supports 180,000 UK jobs by channelling foreign investment into the UK. It estimates that losses to the UK Treasury through legal tax avoidance via Jersey are well under £480m a year, while annual evasion costs are less than £150m.  More on this can be found here.

The French Government is to extend the capital gains tax exemption for second homes to properties owned for 22 years, rather than the current 30 year requirement. The 30-year rule was introduced by the previous Sarkozy government in February 2012 to replace the previous qualifying ownership period of only 15 years, but it accelerated the slump in France’s residential property market.  More on this from the Telegraph can be found here.  A good example of the schizophrenic relationship that exists between certain parts of the UK and France.

Early data collected by Swiss banks from their UK clients under the UK-Swiss tax regularisation agreement suggest that it may reveal far less untaxed income than the UK Government has claimed.  More on this from STEP can be found here.

An Irish parliamentary committee has voted down calls for multinational companies to be grilled in Dublin about their tax affairs, in the wake of a string of controversies at firms such as Google and Apple which use the Irish tax regime. Some of Apple’s largest Irish subsidiaries were found not to be tax resident anywhere, prompting Carl Levin, chair of the US Senate subcommittee on investigations, to call Ireland a tax haven.  More on this from the Guardian can be found here.

The Australian Tax Office will next year conduct 680 reviews and 115 audits of people suspected of using ‘secrecy jurisdictions’ to avoid paying tax.  This is in addition to 1,500 income tax reviews and audits of wealthy individual taxpayers.  More on this can be found here.

The US Internal Revenue Service has begun a drive against multinational companies whose permanent establishment strategies result in some profits not being taxed in any country, so-called “stateless income”.  More on this from Reuters can be found here.

The Spanish government is threatening to open tax investigations into the 6,000 Gibraltar residents who own property in Spain.  This is seemingly in retaliation for the Gibraltar Government’s attempts to exclude Spanish fishing vessels from its waters.  Spain is also considering imposing a €50 tax on vehicles entering or leaving Gibraltar; restricting the use of Spanish airspace to planes bound for Gibraltar; and taxing the many Gibraltar-based Internet gambling companies.  More on this from the BBC website can be found here.

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My final “tax land” of 2012

My final “tax land” of 2012 as I have a looming chapter deadline on the subject of a Scottish tax system.

Where to start?  Let’s start with the UK Chancellor’s “Autumn” statement.

George Osborne admitted that the UK had missed its debt reduction targets putting the UK’s AAA credit rating under threat.  Osborne also announced that the planned rise on fuel duty is to be axed and the personal allowance of income tax payers is to be boosted.  Benefits are to be limited to a 1% rise a year for the next 3 years and economic growth will be lower than predicted until at least 2018.

In response the Institute of Fiscal Studies warned that one million people will find themselves joining the higher 40p income tax rate by 2015.  Far higher than the 400,000 figure quoted by Osborne.  The IFS also said further austerity measures to increase taxes and cut benefits were unavoidable to fix a £27bn black-hole in the UK economy before the next UK General Election.

Figures also showed that poorest 30% of households will suffer the most under the changes announced.  More on this from the Scotsman can be found here.

The AAA rating is of course an issue in the independence referendum.  One of the arguments made by those arguing NO is that an independent Scotland, notwithstanding its oil reserves, would lose its AAA credit rating.  This issue is now a problem for the NO campaign as the UK, in the event of a YES vote, would presumably be desperate to retain Scotland in a monetary union to protect its credit rating.

The YES campaign also received a further boost when it was confirmed that nearly 17 billion barrels of oil are to be recovered from the North Sea over the next 30 years following a £134bn investment by oil and gas companies.  The majority of the new developments will be in Scottish waters while production from gas fields in the southern North Sea begins a dramatic decline. More on this from the Scotsman can be found here.

Now to the tax avoidance debate.

The House of Commons Public Accounts Committee has warned officials from HMRC that firms that devise complicated tax regimes are “running rings” around them. The Committee Chair, Margaret Hodge MP, said that the public would consider such schemes “completely and utterly immoral”. More on this from the Guardian can be found here.  My recent blog on this and the lack of political will to reform the UK’s tax system can be found here.

Meanwhile the Chief Secretary to the UK Treasury, Danny Alexander, has warned against naming and shaming large firms who do not pay the correct amount of tax, insisting that he is obliged to defend firms’ “taxpayer confidentiality”. More on this from the Mirror can be found here.  This adds to the growing evidence that the UK Government is at best being half-hearted in its attempts to tackle this issue.

Further evidence for this claim can be found when you consider that only 5% of the UK Government’s announced investment into HMRC will be aimed at tackling tax avoidance.  The context to this is of course the large budget reduction and cut in staff numbers already made to HMRC.  More on this from the Times can be found here.

According to an investigation by the Times, offshore companies are exploiting a tax loophole which allows them to buy up some of the UK’s most expensive homes and avoid paying property stamp duty, inheritance tax and capital gains tax.  More on this from the Times can be found here.  The Times has done some excellent work on this issue over the last few months.

Figures from HMRC show that the number of people declaring an annual income of more than £1m fell from 16,000 to 6,000 after the previous 50p top rate was brought in.  More on this from the Telegraph can be found here.  What this statistic purports to show is though open to debate.

Final point on the tax avoidance and tax evasion debate.  The claim that I have made on many occasions that tax for some, namely large companies and the wealthy, is becoming a matter of negotiation – almost voluntary in nature – seems now to be generally accepted.  That is clearly what Starbucks think.

The Scottish Government has unveiled plans to reform stamp duty land tax in Scotland.  The importance of this should not be underestimated.  The Scottish Government must show that it has the competence to deal with tax matters.  The signs so far are positive.  More on this can be found here.

Now to matters slight further afield.

France’s Senate has rejected the Government’s 2013 Budget, which among other measures raised the marginal tax rate on annual income of over €150,000 to 45%, imposed a 75% “solidarity contribution” on income over €1m, and raised capital gains tax rates to match income tax rates.  The Budget will though almost certainly be forced through by the National Assembly.  More on this from Tax-news can be found here.

The Republic of Ireland Government has revealed its 2013 Budget.  It introduces a new annual property tax of 0.18% on properties valued below €1m, payable by owners.  More expensive properties will be taxed at €1,800 plus 0.25% of their value over €1m.  Initially, and until 2016, owners’ valuations will be accepted.  More on this from the Irish Times can be found here.

Finally to the USA.  The US Internal Revenue Service has published guidance on calculating the new 3.8% tax on investment income, imposed to pay for President Obama’s universal health insurance plan.  More on this from the Journal of Accountancy can be found here.

This has been a very interesting year for all those interested in tax and the wider Scottish tax and fiscal powers debate. I suspect that is not going to change in 2013.  Best wishes to you and yours for 2013.

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Another week in “tax land”

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.

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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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Just another week in “tax land”?

The term “another week” does not seem appropriate as the title to this blog.

I do not remember all that much about the 1979 referendum and I was living in Chicago during the 1997 referendum.  Odd to think how much I do still remember about Argentina 78.  This week’s announcement ensures that 2014 will now be added to Scotland’s constitutional dateline.  A yes vote in the Autumn of 2014 leads to an independent Scotland by May 2016.  That is why this is not just another week.

What does a yes vote mean?  A yes vote means a Scottish Exchequer.  I have written about a Scottish Exchequer regularly over the last few years including in these blogs and the fiscal powers papers I co-authored with Reform Scotland.  Creating a Scottish Exchequer is not going to happen overnight.  We do though need to start somewhere.  Let’s start with the question: do we need separate HMRC and HM Treasury type bodes?  No.

We also need to look at what other institutions an independent or even a fiscally autonomous Scotland might need.  For example a one stop shop for all Scottish Government legal, registration and tax services.

We also now have to thinking about practicalities.  Would I copy en masse the UK tax legislation as exists in 2014 and declare that no changes will be made for two years?  Yes. This will ensure a degree of certainty for the general public and the business community.  Another advantage is that it would take some pressure off the new Scottish Exchequer.

I am sure I will come back to these and many other issues in the coming weeks and months.

I read with interest that Jeremy Paxman compared Scotland with Zimbabwe in an interview with the First Minister earlier this week.  I remember a similar point being put when I was giving evidence to the Calman Commission.  The transcript for this, page 478, can be found here.

Now to a question I was asked earlier this week.   How would I explain “devo max”.  Two areas need to be looked at.   Government spending and control over taxation.  The percentage that the Scottish Parliament has over each of these areas gives a good idea of how much autonomy it has.   Presently the Scottish Parliament has control over 60% of all government spending but only 7% of taxation.   The Scotland Bill increases taxation control to around 30%.   The latest Reform Scotland proposal, “devolution plus”, moves this closer to 70% for both government spending and control over taxation.  Fiscal autonomy or “devo max” would be around 90% for both government spending and control over taxation.  Fiscal autonomy does not reach 100% because control of VAT cannot be devolved with European Union states and foreign affairs, defence and some economic matters would still be controlled by Westminster.

The Liberal Democrats concerted campaign to dominate the news coverage in the run up to the March UK Budget  continued apace this week.   This week it was the UK Business Secretary, Vince Cable, calling for a mansion tax to be introduced on properties worth over £2 million.  It is estimated that a mansion tax could raise as much as £1.7 billion a year.  Nick Clegg, it is reported, also wants to speed up plans plans to increase the level at which income tax becomes payable, from its current £7,475 to £10,000.   This is presently scheduled for 2015.

Now to Europe.  I have previously blogged on how hard Ireland has had to fight to retain its low rate of corporation tax as a result of its bailout.  What is less well known is how the bailout might impact the Irish legal system.  Excellent article on this in the Law Society Gazette which can be found here.

Now to England and Eric Pickles, UK Communities Secretary, saying that councillors have a “moral duty” to sign up to the UK Government’s council tax freeze.  A moral duty to sign up to government policy.  A tax policy no less.  Interesting tactic.  Not surprisingly this has not gone down well with many English councillors.

More on business rates this week and the debate, for debate read spat, between the STUC and the FSB on the “Small Business Bonus Scheme”.  More on this can be found here.   Good to see that neither side used “morality” in their arguments.

Scottish Water has announced that its charges are to be frozen for the fourth year in a row.  The move means the average annual household charge from April in Scotland will remain at £324.  This is the same level it was in 2009-10.

Some more good news.   The UK Government has agreed to an income tax exemption for non UK competitors at the 2014 Glasgow Commonwealth Games.   This is something I have blogged about before and takes away another point of potential conflict between the Scottish and UK Governments.   Now that agreement has been reached on this and the fossil fuel levy fund I wonder which other niggly issue could be dealt with next?  How about adding aggregates duty, air passenger duty, corporation tax and alcohol duty to the Scotland Bill?  Likely to happen?  No.

One last point.  If you have still not dealt with your tax return please do so as soon as possible even though HMRC have effectively put back the deadline for two days due to possible strike action.  HMRC’s new penalty regime is not something you want to have to deal with.

Have a good weekend.

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“Tax land” from the banks of the “Silvery Tay”

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%.

Now to the UK Budget scheduled for 21 March.  The games have begun and the Deputy PM seems to have got his retalation in first.  Nick Clegg is purported to be urging the Chancellor to include a “mansion tax” on homes worth £2m and measures to stop the avoidance of stamp duty land tax on the sale of high value residential properties.  Will Nick Clegg get his two wishes?  The mansion tax is a long shot.  I cannot remember one Conservative politician saying anything positive about that proposal.  Further measures on stamp duty land tax avoidance is much more likely to be included in the UK Budget.

Further evidence of the tension within the UK coalition on taxation matters is shown by this comment by Lord Oakeshott of Seagrove Bay, a Liberal Democrat peer and close ally of the Business Secretary Vince Cable:  “A mansion tax is the real test of whether the Coalition means business on fair taxation. You can’t claim ‘we are all in it together’ when wealth is virtually untaxed.”

This week also saw author Ian Rankin calling for tax incentives to support new writers.  Rankin said that the UK should adopt a scheme similar to the one already in existance in Ireland.  Under the Irish scheme the first 40,000 euros, roughly £33,000, of annual income earned by writers, composers or visual artists from the sale of their work is exempt from tax.  There have been similar calls for this type of exemption in the past.   Likelihood of success?  The response from the HM Treasury does not leave much wiggle room.

A spokeswoman for the HM Treasury said:  “Any new relief adds complexity to the tax system and could come at considerable cost to the Exchequer at a time when the government’s priority is rebalancing the economy.”  The full article from BBC News website can be found here.

Now to the comments made this week by Ed Miliband leader of Her Majesty’s Opposition.  Milliband would like the Crown Dependencies of Jersey, Guernsey and the Isle of Man to be persecuted as “tax havens”.   For persecution read tougher European Union action.   Milliband is urging the UK Government to force the Crown Dependencies to reveal the names of wealthy UK investors who use tax planning.  If they do not cooperate they would be threatened with being put on the OECD’s (Organisation for Economic Co-operation and Development) blacklist.

This policy might could be included in Labour’s 2015 election manifesto.  Not surprisingly the Crown Dependencies have hit back.   This is from Guernsey’s treasury and resources minister Charles Parkinson:  This is “political posturing by a Labour leader who is struggling in the opinion polls”.  This is an issue that will surface again and again and could eventually result in increased calls for a change in their relationship with both the Crown and the UK.

Now to the fiscal powers debate.  I have for many years suggested that those arguing for fiscal autonomy for Scotland should look to the Isle of Man for some pointers.  That suggestion is as valid as ever as in less than two generations the Isle of Man has achieved almost complete fiscal autonomy.

Also on the fiscal powers debate.  As I have discussed before if you devolve tax and fiscal powers to one part of the UK that might mean tax competition.  How might other parts of the UK react to this?  We have already seen how Northern Ireland has reacted to even the possibility of the Scottish Parliament receiving similar powers over corporation tax.

Another and possibly more interesting example arose this week.  The Scotsman reported that the campaign to gain control of air passenger duty has been undermined by fierce lobbying from regional airports in the north east of England.   The claim is that it would damage their competitiveness.  It seems that the English regions are at last waking up.

I also read with great interest this week that a professional tax adviser has been convicted of a £70m tax fraud that involved donating shares to charities at many times their true value and collecting Gift Aid on the donations.  Yes £70m.  He will be sentenced on 9 February.  I think he should take his toothbrush to the hearing.

I will finish on a statement made by HMRC this week:  “We accept that our service standards last year were unacceptable but all the evidence is that we are turning the corner. “What caught my eye were the words “all the evidence”.  I suspect that I and many others will look at this claim throughout the coming year.

Have a good weekend.






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An interesting week in “tax land”

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.

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Ireland’s low corporation tax rate

The Irish Times reported at the weekend that the French Government is still seeking to have Ireland increase its 12.5% Corporation tax rate in exchange for a deal on improved interest rates on the bailout loans.

The report in the Irish Times can be found here.

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Tax Sovereignty

The Irish Government’s battle to retain a low corporation tax rate was given a boost last week, after the Dutch finance minister backed Ireland’s position.  The comments will help bolster Ireland’s fight against German and French pressure to increase its 12.5% corporation tax rate in exchange for better terms on the €85bn bailout loans from the EU and IMF.

During an official visit by President Mary McAleese to the Netherlands, Dutch finance minister Jan Kees De Jager said that countries should be able to retain sovereignty on tax matters.  Irish Independent 3 May 2011

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