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.

Time for another “tax land”.

Where to start?  Jersey seems as good a place as any.  Jersey is also considering its constitutional options.  This is not new news.  I was in Jersey a couple of years ago and independence was also being discussed amongst the lawyers I was meeting.  Jersey is in a different position to Scotland as it is for all intents and purposes already fiscally autonomous and is a British Crown dependency.  An article on this from the Guardian can be found here.  This is from the Guardian article:

“A barrage of regulatory clampdowns and political attacks on the Channel Islands’ controversial financial industry has prompted one of Jersey’s most senior politicians to call for preparations to be made to break the “thrall of Whitehall” and declare independence from the UK.  Sir Philip Bailhache, the island’s assistant chief minister, said: “I feel that we get a raw deal. I feel it’s not fair.  I think that the duty of Jersey politicians now is to try to explain what the island is doing and not to take things lying down.  The island should be prepared to stand up for itself and should be ready to become independent if it were necessary in Jersey’s interest to do so.”

It seems that the constitutional genie is well and truly out: Scotland, Falkland Islands, Jersey and now it seems on UK membership of the European Union.

Now to the announcement by the Scottish Government of its intention to create its own tax administration and collection agency, to be called Revenue Scotland.  Its main job initially will be to administer the two new Scottish taxes devolved under the Scotland Act.  The fact that it is to work closely with Registers of Scotland and the Scottish Environment Protection Agency, also makes sense.  These new taxes, a Scottish Stamp Duty Land Tax and a Landfill Tax, will be directly linked to the work done by these organisations.  A press release from the Scottish Government on this can be found here.

As regular readers of this blog will know I have been writing about this issue for many years now.  Whilst I welcome this announcement I still think we need to be more radical.  We need to review all government tax, law and registration services.

I was not surprised to see some negative comments about the Revenue Scotland announcement. However, if Scotland has its own tax system it needs its own tax administration and collection agency.  That applies just as much under the Scotland Act as independence.  That though is not the only reason.

Let’s not forget the fact that UK tax law is based on English legal principles, or how HMRC and HM Treasury dealt with the introduction of Stamp Duty Land Tax in Scotland, or the inheritance tax changes to trusts, or the proposed planning-gain supplement, or the Scottish Government’s local income tax proposal or VAT and the new Scottish police and fire services.  All good reasons for welcoming Revenue Scotland.

The Scottish Government is in no doubt that Revenue Scotland will be able to administer the new Scottish taxes at a lower cost than HMRC.  I agree with that.  I have also noticed that no-one seems to remember one of the more ridiculous claims made when the Calman Commission proposals were being debated.  The Scotland Office claimed that the cost of administering a separate Scottish tax system would be the same as the present UK system.   Complete and utter nonsense.  The Scotland Office paper can be found here.

One last point on Revenue Scotland.  I met with a number of Scottish Government officials just before the 2011 Scottish election on this issue.  It was quite clear that they wanted nothing to do with this idea and only met with me at the insistence of a Scottish Minister.  Thank you Jim Mather.  I wonder if their attitude has changed in any way?  Let’s hope so as this is just the start.

The Scottish Government has also published its consultation on a Land and Buildings Transaction Tax.  This will replace Stamp Duty Land Tax.  The consultation for Scotland’s replacement to Landfill tax will follow later this year.  I use the word “summer” advisedly.  The consultation can be found here.

And there’s more.  The Scottish Government has finally published its consultation in a “plastic bag tax”.  The consultation can be found here and a press release from the Scottish Government here.

Even the UK Government is playing its part.  The UK Government is consulting on whether to allow the Scottish Government the power to issue its own bonds.  The move would potentially allow Scottish Ministers to raise hundreds of millions of pounds.  A provision in the Scotland Act 2012 has already enabled the UK government to amend the way in which Scottish Ministers can borrow from 2015-16.  An article on this from the BBC news website can be found here.  The consultation can be found here.

One last point on fiscal powers.  The UK government is reportedly considering proposals to devolve complete control of income tax if Scotland votes ‘no’ in the independence referendum.  This sums up nicely what is wrong with the UK Government’s approach to this debate.  If the UK Government has a serious proposal to make, make it.  If not be quiet.

Now to tax and morality.  David Cameron branded comedian Jimmy Carr “morally wrong” for seeking to avoid paying his fair share of tax.  Mr Carr is understood to use an aggressive, though legal, tax avoidance scheme which enables members to pay income tax as low as 1%.  This is dangerous territory for David Cameron.  Already the press have published the names of many others who are involved in similar schemes.  If David Cameron seriously wants to tackle this issue he must act against all those who seek to evade tax.  Has he considered the public disclosure of all tax returns or a minimum percentage of tax that must be paid?  I suspect not.

This is not just a UK Government issue.  The Herald discovered that Transport Initiatives Edinburgh used tax loopholes to allow directors to avoid paying income tax rates on £1 million in fees and bonuses. The company, which closed last year due to its handling of the trams project, paid directors and consultants through their firms.  As a result, they were subject to 20% corporation tax rather than 40% income tax.  The article from the Herald can be found here.

The evidence that the “rules” do not apply to everyone is growing.  Whether it is the 3,000 UK civil servants being paid through a company, or the payments made to those who were partially responsible for the trams fiasco in Edinburgh or the celebrities avoiding tax.  I am resisting the urge to say it was ever thus but in times such as this it does seem even more reprehensible.

One last point.  I often am quite critical of HMRC.  I would argue for good reason.  That said, is it really time to cut 10,000 jobs?  An article on this and the proposed strike by HMRC staff can be found on the BBC news website here.

Have a good week.