Back to reality in “tax land” after a great Olympics

Let’s start with Gordon Brown’s comments and in particular his claim that devolving tax and fiscal powers to the Scottish Parliament automatically means a “race to the bottom” for tax rates and in particular business tax rates.  There are a number of problems with this statement.  I will simply point out two.  Tax competition already exists.  Not just within the European Union but throughout the world.  Then there is the fact that the underlying law, for example tax reliefs, are just as important as tax rates to business.  Creating a Scottish tax system is also a once in a generation chance to create a simpler and more progressive tax system.  This opportunity is not available to the UK.  Evidence that the present Scottish Government is already putting this opportunity into practice is shown by its excellent consultation on a Land and Buildings Transaction Tax.  My earlier blog on this can be found here

Again on tax powers for the Scottish Parliament.  I was disappointed, but sadly not surprised, to see another patronising picture accompanying an article in Tax Adviser on the subject of the tax powers being devolved to the Scottish Parliament.  First we had a man in a kilt holding a whisky bottle and this month a scene from the movie Braveheart.    

Now to some incredible news.  HM Treasury is going to employ someone in Scotland.  I wonder if this has anything to with a certain referendum.  Of course it does.  An article on this from the BBC news website can be found here.  I did find it amusing that the position ends shortly after the proposed referendum date.  I should not be so cynical.  It is good that HM Treasury is going to try and find someone to appease the natives.  I suspect they have run out of gunboats. 

Now to HMRC.  HMRC is clearly under strain.  In addition to having to deal with numerous devolution issues its budget is being reduced by 15% whilst having to increase tax revenues brought in by compliance activity by £7bn per year by 2014/15.  Not surprisingly HMRC staff have begun “working to rule” to highlight ‘problems caused by the job and budget cuts. 

I was also interested to see that HMRC has published a draft code of governance for resolving tax disputes.  This follows the controversy surrounding some corporate tax disputes of which it was accused of agreeing over-generous resolutions.  An article on this issue can be found here.  

Clearly the UK Government is keen to show it is clamping down on tax evasion.  HMRC has paid out more than £1m in rewards to tax evasion informants since the start of the financial crisis.  An article on this can be found here.  And just to reinforce the point HMRC has published its rogues gallery of tax evaders and fraudsters.  An article on this from the BBC news website can be found here.

Now to an issue I have blogged on recently.  The Office of the Scottish Charity Regulator is reportedly to investigate 50 private schools to see if they meet the “benefit to the public” criteria in order to maintain their charitable status.  An article on this from the Sunday Herald can be found here.  This is an issue that still needs to properly debated.     

Now to the strange world of caravans and an article from the Herald.  It seems that a little-known tax loophole is set to cost Scotland’s councils millions of pounds a year in revenue.  Each caravan in a caravan park can apply for rates relief, which in turn cuts the overall bill for the park considerably.  It seems that few people knew about this loophole until the owners of caravans in the Rosneath Castle Caravan Park, near Helensburgh, first began using it. The 300 caravan owners at the park have now bombarded the Clydebank business ratings assessors’ office with letters and phone calls, each seeking to save a few hundred pounds per year in council rates.  The article from the Herald can be found here

Now to the USA and news that the Democrats are split over estate tax reform.  Democratic Party members of the US Senate have rejected President Obama’s proposal for a 45% top rate of federal estate tax on individual estates worth more than $3.5m.  The tax will rise sharply at the end of this year if Congress fails to agree on reform.  An article on this from Bloomberg can be found here.

Tax is also an issue in the Presidential election.  The Democrats have succeeded in turning the finances of Republican presidential candidate Mitt Romney into a lead news story.  Pressure is growing on Romney to reveal tax returns.  There are accusations that he failed to disclose a Swiss bank account, and even that he participated in the US Internal Revenue Service’s 2009 offshore tax amnesty.  An article on this from Forbes can be found here.

Let’s finish with an old favourite.  It seems that there have been some financial transaction tax stirrings in both Korea and France.  In order to bring the taxation of derivatives in line with other earned income and introduce another revenue source, the Korean Government has announced plans to impose a transaction tax on index options and futures.  France has also partially implanted its own financial transaction tax.  Although a small start, covering only shares in larger companies, and at 0.2%, it’s still lower than UK stamp duty on which it is modelled. Articles on the Korean proposal can be found here and the French proposal here.

Have a good weekend.

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A fairly quiet week in “tax land”

I would like to start with an observation.  Over the last few weeks I have attended a number of tax and law update seminars.  Without exception the speakers have commented on the constitutional debate.  Why should that surprise me?  Even a few months ago this would not have happened.  There might have been the odd mention of the Scotland Bill but even that would just be in passing.  As one of the few lawyers who were willing to discuss tax issues in a constitutional context over the last few years I find this a welcome development.  You never know someone may even listen to my call for a review if all government tax, law and registration services in Scotland.

Most Scottish local authorities will by now have sent out their 2012/13 council tax bills.  This is of course an unusual bill as we know in advance that it will be the same as last year.  One notable exception is Stirling Council which it seems almost by accident reduced its council tax.  Although I get the sense that the council tax “freeze” is being taken for granted it cannot go on forever.  It is obviously important politically and not just because we are just a few weeks away from our local elections.  That said, at some point there needs to be a new review of how we finance local government.  As someone who believes that our councils should have a degree of choice in this matter I would like to see this review begin as soon as possible.

The fiscal powers debate had a fairly quiet week.  No new “commissions” have been announced which is a relief.  An old favourite of those who oppose devolution and independence did though rear its head again.  Ruth Davidson talked about giving Scotland something called “real devolution”.  For “real devolution” read “no more powers for the Scottish Parliament”.  Ruth Davidson said: “I want to talk about devolution – not devo max or devo plus, or devo mix, or I can’t believe it’s not devo – but real devolution from Holyrood to people and communities across Scotland.”  This in my opinion is   similar to the argument that the Scottish Parliament already has lots of fiscal powers that it simply fails to use.  That particular argument is rarely seen outwith the opinion pages of the Scotsman.

An example of this type of thinking was given recently when the UK  Government decided not to devolve control over the Crown Estate to the Scottish Parliament.  Instead the UK Government passed some control over Crown Estate revenue to the National Lottery.  A decision that I think it is fair to say was unexpected.  More on Ruth Davidson’s statement can be found here.  I will ignore the fact that Ruth Davidson appears to be at odds with what the Prime Minister said on his recent visit.

I have been following with interest the debate on introducing a “minimum price” for alcohol.  This is a rare example of a policy where the aim is clearly to change behaviour and not just raise revenue.  I have written before on how policy makers sometimes disingenuously argue that a policy is to change behaviour rather than increase revenue or vice versa.  Personally I have struggled to understand the opposition to this policy.  That said, do I think that a policy of minimum pricing on its own is enough?  Of course not, nor does the Scottish Government and the myriad of health professionals who support this policy.

Do I think that an even better policy could be developed if powers over alcohol duty were to be devolved to the Scottish Parliament?  Yes I do.  This was also pointed out in the Scottish Government’s paper on “Devolving Excise Duty in the Scotland Bill”.  Specifically this would allow the Scottish Government to “align the revenue benefit with the public spending costs of alcohol consumption.”  This would also ensure that the main downside of a minimum price policy, extra revenue for the retailers of alcohol, can be balanced out.  Lastly devolution, as I often say, is complicated.  It makes sense to devolve those tax powers that are clearly connected with already devolved areas of responsibility such as health.  The Scottish Government paper can be found here.  A report from the BBC news website on this issue can also be found here.

The UK coalition government are clearly worried as to how they are being perceived on the now rather unfortunate phrase: “we are all in this together“.  The Deputy Prime Minister is reportedly softening his proposals on a so called “tycoon tax”.  I am not sure why this idea is being called a “tycoon tax” as this is simply a minimum net tax rate for a person’s total income.  In a speech to the Liberal Democrat conference on Sunday he made no mention of a minimum tax rate less than 48 hours after announcing it.  This idea is not a new idea.  Most recently it has been advocated by President Obama.  It is also has the advantage of a being a fairly simple idea.  The Deputy Prime Minister has suggested a 20% rate.  President Obama a 30% rate.  The Obama proposal appeared shortly after it was reported that Republican candidate Mitt Romney, a multimillionaire, had a net tax rate of around 13%.  More on this can be found here.

Let’s finish with London.  Ken Livingstone has denied claims that he has not paid the “correct” amount of tax on his income.  Livingstone also claims that he is the victim of a “smear campaign”.  This story has some similarities with the furore that greeted the news that highly paid public officials were being paid via a company.  My earlier blog on this can be found here.  I have to admit to some sympathy with Livingstone on this one.  Yes there is an element of hypocrisy here but Livingstone is not an elected politician, albeit a candidate, nor is he is a public official.  An article from the Guardian on this can be found here.

Have a good weekend and let’s hope for some good news from Rome.

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