Where to start.  Given it is now just over a year to the referendum that seems a suitable place to start.

There is increasing discussion, mostly criticism, concerning the failure of the ‘NO’ campaign to come up with a credible proposal for substantial additional powers for the Scottish Parliament. That said, the likelihood of a joint proposal from the ‘NO’ side is extremely unlikely.  Some want powers removed from Scotland in the event of a ‘NO’ vote.  Some do not want any more powers devolved to Scotland and insist that in any case that is a decision for the whole of the UK.   Even those who argue for greater powers for the Scottish Parliament are only arguing for three or four relatively minor tax powers.  Two of my earlier bogs on this issue outline the proposals in more detail and also how these extremely modest proposals would not take effect for at least a decade.  These blogs: “Tax powers so far refused by Westminster” can be found here and “Likely timescale for additional Scottish tax and fiscal powers” can be found here. Substantial welfare powers are of course not even being considered by the Unionist parties.    

A good example of how few powers are being considered can be found in this interview of Michael Moore.  The article on this can be found here.  It is worth noting that this is the view of the Liberal Democrats supposedly the strongest advocate of increasing the powers of the Scottish Parliament.

Another factor of this debate that as yet is not being widely commented upon are the anomalies that can arise under devolution.  Take for example inheritance tax.  Inheritance tax is controlled by Westminster but succession law and social care are controlled by Holyrood. Does that make any sense?  Of course not.  With this in mind please see the following article from the Scotsman which can be found here.

Now to specifically Scottish tax matters.

A “Revenue Scotland and Tax Powers Bill” will establish a new authority for the collection of devolved taxes from 2015.  The First Minister described this as a “historic step”, but also just a “first-step” – since Scotland would still only collect 15% of all taxation revenue and the Parliament would remain a “spending chamber rather than a revenue raising chamber”.  More on this can be found here.  This is an important landmark in the creation of a Scottish tax system.

No-one I suspect was surprised at this announcement.  “Scottish and Welsh red meat levy bodies are unlikely to recoup levy money lost when animals are slaughtered in England, UK farm minister David Heath has said.”  More on this can be found here.  This type of argument, in short Westminster knows best, has of course been made many times before.  Some matters where this argument has been used include: fossil fuel levy, attendance allowance, VAT and the new Scottish police and fire services, energy transmission charges, mobile phone coverage, delivery charges and local income tax.  The UK Government’s attitude to relatively minor issues such as the so called “meat levy” simply adds to the doubt that the UK Government will act in a positive way to calls for further powers to be devolved in the event of a ‘NO’ vote.

The Scottish Parliament’s Finance Committee has welcomed proposed new legislation which will see Scotland take responsibility from the UK Government for landfill tax.  The Committee also welcomed proposals to impose landfill tax on unauthorised disposals to landfill following the identification of illegal sites and to increase the credit limit on contributions to the Landfill Communities Fund, which provides funding for community or environmental projects in areas affected by landfill sites.  More on this can be found here.

Now to the “bedroom tax” or to give it it’s Sunday name, “spare room subsidy”.

Social housing residents affected by the UK Government’s “bedroom tax” may be able to appeal depending on the size of their spare room, after a tribunal ruled the size of a room has to be taken into account when imposing the controversial policy.

The UK Government has played down the implications of the ruling.  A spokeswoman for the Department of Work and Pensions said: “It is simply not affordable to pay housing benefit for people to have spare rooms, and our reforms in the social sector mean families receive help for the number of bedrooms they need, and these are exactly the same rules as in the private sector.” Meanwhile, a United Nations special investigator has described the bedroom tax as a “shocking” policy which could constitute a violation of the human right to adequate housing.

More on this from the Scotsman can be found here and the Guardian here.  This policy, it is argued, shows the widening gap on welfare matters between Holyrood and Westminster.

Now to the tax avoidance debate. Let’s start with some irony.  An adviser to HMRC has had to resign as a result of an investigation by the BBC.  The irony is the BBC’s own attitude to severance payments and tax avoidance schemes involving its own staff.  More on this can be found here.

Further evidence as to how we are definitely not “all in this together”.  Top civil servants are having some tax paid using public money, a newspaper investigation has revealed.  More on this can be found here.

And finally on tax avoidance. “It is not possible to construe a director’s duty to promote the success of the company as constituting a positive duty to avoid tax.”  The legal advice quoted may well turn out to be one of most important contributions to the tax avoidance debate.  More on this can be found here.

Now to matters further afield.

In response to a question asked in the Spanish parliament, the Spanish Government was obliged to disclose the amount of unpaid tax owed by professional football clubs in the country’s top two divisions. The sum was a staggering €663,876,441 (about £575m).  More on this can be found here.

The number of Americans renouncing their US citizenship has jumped by a factor of six in 2013, according to official figures. The reason is generally accepted as the difficulties caused to expatriates by the soon-to-be-active “Foreign Account Tax Compliance Act”, in conjunction with the USA’s extra-territorial taxation system.  More on this can be found here.

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.

Let’s start with the independence debate.  I would normally refer to this as the “fiscal powers” debate but there seems little point as that ship appears to have sailed.  Some things are becoming clearer.  There is not going to be a second question.  The likelihood of serious additional fiscal powers being devolved to the Scottish Parliament if Scotland votes ‘No’ also now seems increasingly unlikely.

It is not difficult to imagine the appetite for even listening to arguments for additional fiscal powers at Westminster in that event.  That is where the Devo Plus campaign has got it wrong.  And I say this as one of the authors of the Reform Scotland Fiscal Powers papers on which their proposal is based.  Devo Plus are arguing for a ‘No’ vote and also that there should not be a second question.  Do they really think Westminster will seriously consider devolving further powers to the Scottish Parliament if Scotland votes ‘No’?  An article by Jeremy Purvis who leads the Devo Plus campaign can be found here.  On a personal note it is disappointing to see that Reform Scotland have now taken a stance on Scotland’s constitutional question by its support for Devo Plus.

The fact that only the Liberal Democrats are going to have a further devolution proposal by the time the referendum takes place reinforces this argument.

So if there is not to be a second question, what do those who have supported devo max previously do?  The impact and importance of Jim McColl’s announcement in favour of independence should not be under estimated.  A BBC news website report on this can be found here.

Now to taxing the wealthy.  Just now politicians seem to talk of little else.  Let’s ignore for now what actually constitutes wealth.

Let’s start with an article by George Kerevan on the Scotsman.  Kerevan argues against taxing the wealthy, believing that it is arbitrary, complicated to administer, and does not raise enough money relative to the trouble it takes to collect it.   His article can be found here.

Nick Clegg wants to ensure that the rich “pay their fair share”.  He has vowed to block further welfare cuts until a mansion tax is agreed with his Tory coalition partners. Vince Cable has also spoken out against tax havens and non-domiciles.  Then there is Danny Alexander.  He has promised tax investigations for all those who own assets worth more than £1 million.  The cynic in me says: I have heard a lot of this before and not just on tax reform.  What about the banks.  Has anything of substance actually been done?

Then there is the evolving love in between Ed Balls and Nick Clegg.  Ed Balls told the Independent newspaper that a future Labour UK Government could impose an annual levy on expensive properties, unlike Nick Clegg though, he favours a permanent rather than temporary wealth tax.  The article in the Independent can be found here.  This does seem more like mischief making than serious policy making given how long the last UK Labour Government were in power.

One reason for my cynicism is a claim made by the SNP this week.  The claim is that there are fewer, not more, tax inspectors.  I have blogged before on how HMRC’s budget has been reduced and of the large number of HMRC redundancies.  If we are serious about tackling tax evasion then you need a properly resourced tax collection agency.  Transparency would not go a miss either.  How about publishing tax returns?  The SNP press release on this can be found here.

So what can be done?  HMRC’s High Net Worth Unit has brought in £500 million in extra tax from the UK’s 5,000 wealthiest people since it launched three years ago. The amount collected is well over the original target of £100 million a year.  A press release from HMRC on this can be found here.  And of course this was achieved in a time where HMRC’s budget has been cut.

Finally on this issue, an excellent article by Iain MacWhirter in the Herald.  MacWhirter points to the relative insignificance of the cost of the so called “free services” as compared with the salaries and pensions of the higher-earning public sector workers.  The article in the Herald can be found here.

These services are of course not “free”.  They are paid for by taxation.  Taxation is simply a series of political choices.

The introduction of a 15% rate of stamp duty land tax on corporate buyers in this year’s UK Budget, it is claimed, has had a dramatic impact on the high-value London property market.  The article from the online STEP journal can be found here here.  I must admit to struggling to see why this is a bad thing.

About 60% of all taxpayers’ complaints against HMRC are upheld on appeal, according to figures from Pinsent Masons. Some 58,110 complaints were made last year, of which more than 33,000 were accepted either by an internal HMRC review or by the Adjudicator’s Office.  A report on this can be found here.

Barclays Bank is to cut back on its UK tax planning unit, after a dispute with the tax authorities over ‘aggressive’ schemes tarnished its public image.  A report on this can be found here.

Now to matters slightly further afield.

Firstly to America and the never ending saga of Mitt Romney’s tax affairs.  Romney has at last published his 2011 tax return.  It turns out Romney and his wife paid $1.936 million in taxes on gross income of $13.7 million.  That is a tax rate of 14.1%.  The article from the online STEP journal can be found here.  I suspect that this is not the end of this matter.

Francois Hollande has revealed details of his 75% top rate of income tax for France’s wealthiest citizens.  Newspaper reports suggest there are likely to be concessions for married couples, performers and sports stars.  Meanwhile the richest man in France, Bernard Arnault, has applied for Belgian nationality to escape the tax.  An article on this from the Guardian can be found here.  Again, I suspect that this is an issue that is going to run and run.

A Spanish newspaper has reported that the country is about to double capital gains tax on short term gains to 52%.  This gives a sense of the level of problems now faced by Spain.  An article on this can be found here.

Have a good weekend.

The main story of the week has to be the fact that the UK Chancellor, yes the UK Chancellor, said:  “I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs – and to be fair it’s within the tax laws – so that they were regularly paying virtually no income tax.  And I don’t think that’s right.”

Words almost fail me.  Then again maybe I should be glad that George Osborne has finally realised what was clearly obvious to everyone else.  HMRC provided the UK Chancellor with anonymised copies of the confidential tax returns submitted to them by some of the UK’s wealthiest people.  These returns showed that the 20 biggest tax avoiders had legally reduced their income tax bills by a total of £145m in a year.  According to the report, the very rich have managed to reduce their income tax rate to an average of 10%; less than half the amount paid by the average Briton.  A report on this from the BBC news website can be found here.  Helpfully the BBC news website has also outlined the most common tax avoidance schemes.  This can be found here.

I am not sure that the Prime Minister’s announcement that he will publish details of his taxes is going to help the UK Government out of the hole they are digging for themselves.  As the UK Chancellor noted, these people are acting within the law.  Take for example the proposed cap on income tax reliefs.  The cap will apply only to those reliefs that are currently unlimited, which will therefore exclude pension contributions and EIS investments, among others.  The proposals will cap tax relief to 25% of income or £50,000 whichever is greater.  It is expected the draft legislation will be published for consultation later this year.

HM Treasury has now published more information on this proposal.  The report, which confirms charitable gift relief will be included in the cap, can be found here.  The report notes that current unlimited relief policy allows individuals to pay no income tax at all, which is not permitted in, for example, the US tax system.

Is that the end of the matter?  Of course not.  The Scotsman reports that Sir Tom Hunter has criticised George Osborne’s plans to cap tax relief on charitable donations as “ill-thought-out and punitive”.  The Scotsman article can be found here.  It is quite clear that charities fear their funding is under threat.  This sums up nicely the problem facing George Osborne.  He wants to crack down on aggressive tax avoidance but that is easier said than done.  Almost any proposal to change the tax system results in a campaign to prevent or amend the proposal.

Now to another controversial issue, retrospective changes to tax law.  HM Treasury has published the process it will follow when making unexpected changes to tax law.  The statement gives an undertaking that retrospective measures will be “wholly exceptional”.  The statement from HM Treasury can be found here.  A recent of example of a retrospective change to tax legislation involved Barclays bank.  A BBC news website report on the Barclays bank matter can be found here.  If the UK Chancellor is serious about tackling aggressive anti-avoidance then I am sure we will see many more examples of retrospective changes to our tax law.

Finance Secretary, John Swinney, has announced incentives and actions to stimulate investment, in four enterprise sectors, for green energy, manufacturing and life science.  These incentives include business rate discounts worth up to £275,000 per business or enhanced capital allowances, new streamlined planning protocols across all sites, skills and training support and an international marketing campaign to promote the sites.  A press release from the Scottish Government on this can be found here.

Now to VAT and two issues I have blogged about before.  A great deal has been written about pasties and VAT since the UK Budget statement.  What though of another VAT anomaly.  Why is VAT levied on the renovation of old buildings but not on the sale of new houses?  Does this encourage energy saving?  Does this encourage the building of new homes?  Why not at least introduce a lower rate of VAT on residential renovations and repairs, as happens in the Isle of Man.  Sadly more questions than answers or signs of any change of policy.  A link to my earlier blog on this issue can be found here.

The Scottish Liberal Democrats have urged the Scottish Government to drop their plans for a single police force over concerns that the force will potentially face an annual £22m VAT bill. The eight existing forces are currently exempt from the tax due to their ties to local authorities.  A link to an earlier blog that covers this issue can be found here.  My earlier blog also includes my expectations as to how HM Treasury will view this matter.  Although I can understand the Scottish Liberal Democrats opposition to the single force policy, do they really think that the VAT should be levied?  If not, will they lobby their UK counterparts who, after all, are in charge of HM Treasury on this matter?  I suspect not.  The Liberal Democrats press release can be found here.

To Wales and the news that Welsh supermarkets have seen a massive drop in the use of plastic bags when they charge for them.  A 5p bag levy was introduced across Wales last year.  A report on this from the Daily Mail online can be found here.  Good to see the Daily Mail outlining the situation in the other parts of the UK.

The Spanish Government has announced a general tax amnesty offering taxpayers the chance to disclose irregularities in their past affairs without being prosecuted or penalised. The cost is a one-off payment of 10% of all undeclared assets and rights.  This follows similar measures in Greece and Italy.  More information on the Spanish amnesty can be found here.

Have a good weekend.