“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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Scotland takes centre stage in “taxland”

Where shall I start?

I think I will start with the small matter of Scotland’s constitutional future.  The news coverage this week shows that this is no longer a strictly Scottish debate.  I personally have found it fascinating watching and listening to UK political commentators trying to get up to speed as quickly as possible.  It won’t be long before they realise that a yes vote will mean tax competition, a Scottish Exchequer, the end to the Barnett formula and less Liberal MPs (there is a bigger loss in percentage terms of MPs to the Liberals than Labour).  I am sure I will come back to this topic regularly throughout 2012.

Not to the sudden upsurge in interest on tax avoidance and the likelihood of the UK Government introducing a general anti-avoidance rule (“GAAR”).  Recent statements by both the PM and Deputy PM strongly suggest that such a provision will be approved this year. The Deputy PM has said: “there should be a general rule that you can’t play the system” and that a “simpler, more open, fairer tax system in which everyone pays their fair share should be created.”  The UK Government’s own report on GAAR came out in favour of a narrowly focused GAAR.  It seems after many years of lurking in the shadows GAAR’s time has come.  I for one welcome this as it is a step on the road to a simpler tax system.

Now back to an old favourite from 2011.  The PM has insisted that the 50p tax rate on higher earners is “temporary” and has hinted that the issue will be reviewed in the run-up to the UK Budget.  The news coverage on this issue suggests that the PM is coming under pressure from business leaders and backbench Conservative MPs.  The question is who will the PM listen to?  There is an equally strong lobby arguing for its retention.  This includes his coalition partner.  I expect to see a report within the next few weeks pointing out how little revenue the higher rate produces.  That though is only part of the debate.  The bigger picture cannot be ignored and I am sure the PM is well aware of this.

Now to a Scottish Government tax proposal.  This proposal was dubbed the “Tesco tax”.  The Scottish Government prefer to refer to this as a “public health levy”.  The supermarkets’ campaign against this proposal started in earnest this week.  The supermarkets claim that the new levy on all major stores selling alcohol and cigarettes will reduce their profits by 10%.  This debate, for debate read battle, has just begun.  An article from the Scotsman on this can be found here.

I like to remind people from time that on one side there is taxation and on the other there is public spending.  The National Audit Office produced another eye watering figure this week.  They said that more than £31 billion of taxpayers’ money has been wasted across government departments in the past two years.  They analysed more than 70 reports and found both annual overspending and waste from delayed and abandoned projects in areas ranging from welfare and capital projects to farm payments.

Now to HMRC and two positive stories.  Following a concerted campaign from numerous business and other professional bodies HMRC is reconsidering its Business Records Check project under which small businesses can be fined £3,000 for not keeping full records during the current tax year even if it later turns out that their tax affairs are in order.  While the review is under way HMRC will not penalise taxpayers and agents for poor record-keeping “except in extreme cases.”  This announcement is to be welcomed.

HMRC is also piloting a new method of resolving its disputes with small business. The Alternative Dispute Resolution (ADR) procedure will use ‘independent’ HMRC facilitators to resolve certain kinds of dispute during a compliance check but before a decision or assessment has been made.  More information can be found here.  Again a positive move by HMRC.

Europe is rarely out of the news for long.  I was interested to read that President Sarkozy is insisting that France must press ahead with a tax on financial transactions to force the issue in Europe.  It seems that the French will introduce legislation next month even without knowing if other countries will follow.  Expect to see this raised at the next European summit.

Finally to football and HMRC’s continuing interest in the so called “beautiful game”.  HMRC has sent a questionnaire to all of the UK’s leading football clubs asking about remuneration and perks for players and their families.  Can you imagine what might be disclosed?

Have a good weekend.


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“Tax land” from a storm damaged flat in Edinburgh

Happy New Year to you all.

I think I will start with something I have blogged on a few times before.  This week’s storm has caused a huge amount of damage in Scotland and in other parts of the UK.  This is going to mean a lot of extra work for our building industry.  That will mean increased revenue for the UK Government primarily through VAT receipts.  That gives us the perfect opportunity to justify a reduction in VAT on residential property repairs and improvements.  As I have noted before this already happens in the Isle of Man.

I was interested to hear what Nick Clegg was saying on Radio 4 earlier today.   In essence he said: “… the public is angered that large companies and a wealthy elite get out of paying their fair share of tax.”   It seems that the UK Government has at last realised that the public must feel that, and to borrow a well worn phrase, “we are all in this together”.  This was in fact the main point of my last blog of 2011 which can be found here.

I am also sure it is not a coincidence that the Prime Minister in his New Year message and again today vowed to tackle excessive “City” pay and to promise a new clampdown on tax avoidance.  David Cameron said: “While a few at the top get rewards that seem to have nothing to do with the risks they take or the effort they put in, many others are stuck on benefits, without hope or responsibility.”  Reward without risk is a terrible combination.

In addition HMRC have been accused of focusing on small firms while taking a more relaxed approach to the tax liabilities of major companies.  Again this goes back to an issue that I wrote about in my last blog of 2011.   It is claimed that up to 20,000 firms will be inspected from April to assess if they can back up their tax returns with paperwork going back several years.   The article from the Guardian can be found here.

The UK Government has also this week had to defend its policy of tax breaks for hiring new workers after the Labour Party estimated that just 10,000 companies had taken advantage of the incentive since its introduction.  In the 2010 Budget George Osborne said that up to 400,000 small businesses would take up relief on national insurance payments for new employees.  The BBC news report can be found here.

Couples with young children will be hardest hit by changes in the tax and benefit system, with the typical family losing more than £1,200 over five years, a new study has estimated.  The report from the Institute for Fiscal Studies also suggested that the UK Government’s welfare reforms will reduce the financial incentives for mothers to go out to work.   The BBC news report can be found here.

Now to a phrase that I had thought had gone out of fashion: “stealth taxes”.  Labour are claiming that the sharp rise in the cost of council services for elderly and disabled people in England and Wales is in effect a “stealth tax”.  Pot kettle black springs to mind.  The BBC news report can be found here.

I would also like to finish on a winter theme.  Winter fuel allowance became a news topic just before Christmas when it was reported that this payment is also made to British expatriates in Europe’s hottest countries.  These payments have almost doubled in five years to around £14m a year.  That though is not the main issue.  If we are truly in such a poor financial state not only does the payment to those living in sunnier climes need to be looked at but whether we can continue to make such a payment at all.  The cost of this allowance is now approaching £3bn.  At the very least there needs to be a debate on whether it should be means tested.

Have a good weekend.

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A year in “tax land”

A year in which we were told the economy would grow and the recovery would begin in earnest.   A year ending with almost everyone predicting hard times ahead.

The past year has been dominated by the economic crisis and the fiscal powers debate.  Let’s start with the economic crisis.

The link between what a government spends and how it funds this spending is an obvious one.  Whatever the government spends it needs to match by taxation or borrowing.  The consensus now is that we have a “debt crisis” rather than a recession.  The main political debate is between those who wish to restrict government spending and those who argue for more government spending to grow the economy.

I agree that spending must be reduced.  There is little doubt that the UK has been living beyond its means.  Even when the UK Government manages to balance its books the national UK debt needs to be serviced and at some point paid off.  The scale of the task is such that even under coalition government plans it is going to be at least another five years before the books are balanced.

If there is to be additional spending on say infrastructure then public spending in another should be reduced.  Growth is important but so is reducing the debt mountain.  The trick is to somehow do both.  Is there a simple answer to this conundrum?  Of course there isn’t.

There is though a related issue that needs to be addressed.  We are often told “we are all in this together”.   The problem with that statement is we keep hearing about sections of society that seem to be treated differently.  Bankers and their bonuses is close to becoming a cliché but what of those in senior positions in the public sector.  Can it be right that salary levels, bonuses and the numerous associated benefits of many of those who work in the public sector are so high and wide ranging and far in excess of the majority rest of the workforce?  One example.   Dave Hartnett head of HMRC is to take early retirement next summer with a pension pot of £1.7 million.  I have blogged on Mr Hartnett before.  It seems he may even get a bonus this year.

That is where the public spending debate is moving.  If public spending needs to be reduced, and let’s be clear it does, then the starting point cannot be reducing those who in the public’s eyes actually do the work.  First things first.  I keep hearing and reading about highly paid public sector managers who earn lots but no one is sure what they do.  My question is a simple one.  Is this actually true?

Then there is HMRC and the claim by the House of Commons Public Accounts Committee that there is £25bn in tax owed by large companies.  HMRC has “previous” with this Committee of which I have blogged on before.  The taxation of large companies is complicated but that is a huge sum of money.  Again this makes me wonder if we are all in this together.

The taxation of large companies is complicated but does HMRC treat all businesses the same?    Evidence gathered by the law firm McGrigors showed that HMRC is increasingly using legal powers to force the settlement of unpaid tax bills in Scotland.  The use of similar powers in England and Wales fell over the same period.  Does this mean that not all businesses are treated equally?  I don’t know but the question needs to be asked and answered.

What about the richest in our society?  Our governments, both in London and Edinburgh, along with HMRC must do more to defeat the perception that for the wealthy paying tax is a choice.  One example.  The avoidance of Stamp Duty Land Tax on valuable residential properties via offshore companies should be stopped.

Are we all in this together?  It does not seem so.

One last point before I move on to the fiscal powers debate.

The UK Government’s decision to waive VAT on the Military Wives Choir Christmas single is an example of what is wrong with how we decide as to whom and what we tax.  Is this a great cause?  Yes of course.  Are there lots of other equally great causes?  Yes there are.

Now to the fiscal powers debate.  The result of the Scottish General Election has ensured that the fiscal powers debate in Scotland has taken centre stage.  The Scottish Parliament may even refuse legislative consent for the Scotland Bill.   I like to refer to the Scotland Bill as “Calman minus”.  My own opinion is that the Scotland Bill was never meant to be fit for purpose.

The fact that the UK Government will not even agree to devolve air passenger duty or control over the Crown Estate shows how out of touch they are.   The debate has moved on.  My last few tax blogs show how quickly the debate is moving.  Even senior members of the Labour party in Scotland favour “devo max”.  Hopefully in 2012 we will learn more of what “devo max” actually means.

The fiscal powers debate is no longer confined to Scotland.  I must admit I did not see this coming.  The Eurozone crisis and proposals such as a European Financial Transaction Tax has stirred the euro sceptics and that was before the call for greater fiscal union amongst the Eurozone countries.  The analogy between Scotland’s relationship with the UK and the UK’s relationship with the European Union is an obvious one.  The European angle to the fiscal powers debate has the potential to cause problems for those who arguing for major fiscal powers for the Scottish Parliament and those who oppose this.  I suspect I will be blogging on this regularly throughout 2012.

A quick word on Ireland.  How far will countries such as Ireland be willing to go to stay a member of the Eurozone?  Will Ireland give up its treasured low rate of corporation tax?  Does Ireland have a choice?

Lastly what am I hoping for on the tax front in 2012?  Now is not the time to be greedy.  A VAT reduction for home repairs and improvements is much needed.  A tax exemption for the governing body and the competitors of Glasgow 2014 is essential for the success of these games.  Less specifically I would like to see some evidence from the powers that tax us that we are all in this together.

Merry Christmas and best wishes to you and yours for 2012.   See you again in the New Year.

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The Scotland Bill again takes centre stage in “tax land”

Let’s start with the fiscal powers debate.

Another interesting week.  When I started writing about the fiscal powers debate I was of course writing about Scotland and its relationship with the rest of the UK.   That debate is now reaching maturity and the end of the Scottish “Phoney War” is in sight.  That being the Scotland Bill.  The real debate between “devo max” and independence is just about to break through the Ardennes.

What I have found fascinating this week is the emergence of a second fiscal powers front into the public domain.  This is no longer just an issue for a relatively small group of Euro sceptics.

Prior to WWII the Germans feared a second front.  Even though they feared it, that is what they ended up with.  The UK now finds itself fighting on two fiscal powers fronts.  The second front being its fiscal relationship with the European Union.  This goes further than the proposed European financial transaction tax.  How much fiscal union will Germany and France press for?  That is the elephant in the room.

As I have blogged on before, the analogy between these two fiscal powers debate is an obvious one and poses difficult questions for each side in the debate.   Just to add to the complexity of this matter, two other fronts could flair up at anytime: Northern Ireland and Wales.

So what has been happening here in Scotland.  The Scottish Parliament’s Scotland Bill Committee has now issued its final report.  The report can be found here.  The Committee has said it is “unable to recommend” the Bill.  The  Committee also found that the plans were “not yet fit for purpose”.

What will the UK Government do?  I suspect many in Westminster and not just in the coalition would like to see the Bill fail.  Excellent blog by Alan Trench on this point.  Alan’s blog can be found here.

The report shows perfectly how the gulf between the UK Government and those arguing for “devo max” or independence is as wide as ever.  One example.  The UK Government’s refusal to devolve complete control of the Crown Estate to the Scottish Parliament.  Last week a similar announcement was made concerning air passenger duty.  Even the Labour, the Tory and the Lib Dem members of the Scotland Bill Committee want control over the Crown Estate to be devolved.

The UK Government, and the Labour party, will also have to deal with an amendment by George Foulkes to the Scotland Bill.  His amendment calls for all fiscal powers to pass to the Scottish Parliament.

As I said another interesting week.  Also difficult to keep up with all that is happening.

A quick point on Europe.  Glad to see that the Prime Minister finally started to talk about Scotland and Birmingham in the context of financial services.  He clearly realised that continuously banging on about the City of London was not going down well in other parts of the UK.

Now to other matters.  Finance Secretary John Swinney has announced that business rates will rise by 5.6% next year.  The rate currently stands at 42.6p, and will rise to 45p.  An opportunity missed?  Possibly.  We might not have heard the last on this.

HMRC have published information on the new “Rural Fuel Duty relief scheme” for retailers of road fuel on the Inner and Outer Hebrides, the Northern Isles, the Islands of the Clyde and the Isles of Scilly.  This is being introduced on 1 January 2012.  More information can be found here.  This has received relatively little publicity.

I was not surprised to read that the controversial head of HMRC, Dave Hartnett, will “retire” in the summer of 2012.  Mr Hartnett is no stronger to controversy.  His recent apology to the House of Commons Public Accounts Committee MPs for the tax deal negotiated by HMRC with Goldman Sachs was I suspect the final straw.

Finally, I found myself agreeing with the claim made by McGrigors that tax officials are increasingly using legal powers to force the settlement of unpaid tax bills in Scotland.   Information obtained by McGrigors under the Freedom of Information Act showed the number of petitions for bankruptcy filed by HMRC in Scotland increased by 97% over a three-year period.  The use of similar powers in England and Wales fell over the same period.  The story from BBC News can be found here.  Excellent work by McGrigors.

Have a good weekend.

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Europe takes centre stage in “tax land”

The debate over a European financial transaction tax is gathering pace.  Let’s start with terminology.  The UK Government like to refer to this as a tax on London.  What they don’t understand, or maybe they do, is that this really annoys the European proposers of this tax.   Many European leaders and commentators blame London and New York for the banking crisis and cannot understand why the UK Government should be so protective of London.  I should add the continual reference to London also annoys me as Edinburgh is also a financial centre.  London is not the UK it is just part of the UK.

The UK Government say any such tax must be imposed world wide and not just confined to Europe.  The proposers point out that you have to start somewhere and if we wait for world wide agreement nothing will happen.  They also imply that this is what the UK Government secretly wants.  Do the European proposers understand the importance of London to the UK Government?  It seems not.  To complicate matters further Ireland has said that it will not introduce this tax if the UK does not.  I wonder what a fiscally autonomous or independent Scotland would do?

This debate cannot be separated from David Cameron’s newly found European scepticism.  I am sure the French will have laughed heartily when they heard David Cameron’s joke about a cheese tax!  I also suspect that commentators will soon catch on to the analogy between the UK Government’s desire for repatriation of powers from the European Union and the Scottish constitutional debate.  The analogy is an obvious one.

We also now know a bit more about the proposed tax:

  • The European Commission says the tax would be levied at 0.1% on all transactions between financial institutions when at least one party is based in the EU
  • Derivative contracts – bets on movements in currencies and other assets – would be taxed at 0.01%.
  • The tax would be expected to raise about £50bn a year and would come into effect in 2014

Glad to see that the UK and Scottish governments have finally reached an agreement on allowing the Scottish Government to access its own fossil fuel levy funds.  This is a tax paid by suppliers of non-renewable energy sources.  The account holds approximately £206m.  Under the agreement, £103m will go towards Scottish renewable energy projects, including wave and tidal schemes.  The remaining £103m will be made available to support the capitalisation of the proposed Green Investment Bank.

Now to HMRC and its latest staff survey.   The conclusion is that its staff still have little faith in the abilities of their senior managers.   The latest staff survey showed only 13% felt changes were usually for the better; only 15% felt change was well managed; and only 17% had confidence in the decisions of senior managers.  Although these results were better than last year, 20% of staff still wanted to leave immediately or in the next year.  The 38,416 staff who responded represented a 52% response rate.  HMRC commented: “Since our last survey results there have been improvements that give rise to cautious optimism”.  The full story can be found here.

Every taxpayer may be given online access to their tax records.  This idea is part of a UK Government consultation on making the personal tax system easier to use and understand.  Other ideas include supplying pre-filled tax returns to people in the self-assessment system, using information from employers and banks, and sending each taxpayer an annual tax statement in addition to their normal P60 form and PAYE tax code notice.  Good to see a UK Government thinking about things from the point of view from the taxpayer.

Now to a claim from a Scottish accountant that HMRC is disproportionately targeting Scottish businesses.  HMRC said it would launch nine new task forces to investigate specific industry compliance in the 2011/12 year, seven of which are already running.

One for the first task forces to launch, targeting the restaurant trade, has so far launched investigations into 531 UK restaurants with 222 (42 per cent) of those in Scotland.  This compares with just 159 investigations for the whole of London and 150 in the North West of England.  The full story can be found here.

I will end with the Scotland Bill and whether it will become an Act.  What is interesting is how commentators have suddenly woken up to the fact of how much danger the Bill is in.  The Bill could be scuppered by either the Scottish or UK Governments.

One reason for this is the supposed supporters of this Bill seem unable to defend or even explain the contraversial income tax proposal.  As Malcolm Chisholm MSP pointed out last week at Holyrood’s Scotland Bill conference, the proposers of the Bill have failed to explain why the Bill is a positive move for either the Scottish Parliament or the Scottish people.

Have a good weekend.

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Another week in “tax land”

Let’s start with the highlight of my week.  This would have been the result of last weekend’s Gala v Melrose game but a try in the last few minutes put paid to that.  So instead it has to be speaking at Holyrood’s Scotland Bill conference.  The text of my speech can be found here.

I was very impressed with Malcolm Chisholm MSP and not just becuase he said some nice things about the fiscal power papers I had a part in drafting for Reform Scotland.  He also summed up nicely why is there is so little support for the Scotland Bill including it seemed at this conference.  His argument was a simple one.  Those who should be campaigning for this Bill are not doing so mainly because there is almost nothing positive to say about it.

Next to a worrying story from BBC News.  I am not sure what is more worrying. The fact that MPs had to put a senior official under oath or that civil servants get paid bonuses.

Members of the Commons Public Accounts committee felt they had been unable to get answers from Anthony Inglese, HMRC’s senior lawyer, so they took the highly unusual step of making him swear an oath to tell the truth.  Parliamentary staff said that nobody had been asked to swear an oath by a parliamentary committee for more than a decade.

The session before the committee was part of an inquiry into tax deals negotiated by HMRC with Vodafone and Goldman Sachs.  The full story can be found here.  An earlier story from the Guardian on the background to this can be found here.

Back to the fiscal powers debate.  Not surprised to hear that the UK Government has already ruled out giving the Scottish Parliament even partial control over corporation tax.  Graham Gudgin made the claim while giving evidence to the Scotland Bill committee.  He said he had “reliable information” that the tax power would not be given to Scotland “under any circumstances”.

As I mentioned in my speech earlier this week it seems that the UK Government is just not interested in adding any powers to the Scotland Bill or dealing with some niggly issues such as a tax exemption  for the Glasgow Commonwealth Games.

I see that the Scottish Government are again asking the UK Government to reduce VAT on home repairs and renovations.  I am wondering why they are still not referring to the situation in the Isle of Man.  If anyone from the Scottish Government is reading this you might want to have a look at this.

Now to North Sea revenue and a report by Aberdeen and Grampian Chamber of Commerce. The 15th Oil and Gas survey said confidence and investment were still being dented by the changes announced in this year’s UK Budget. More than half of oil and gas operators surveyed believe the Budget’s £2bn industry tax hike has harmed North Sea investment.  The supplementary tax on North Sea oil production rose from 20% to 32% to fund a cut in UK government fuel duty.

Have a good weekend.

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Another week in “tax land”

Party conference season is over and the clocks are about to change.

Two main taxation topics from the SNP conference.  Not supprisingly North sea oil and gas taxation was one.  One reason for this are the recent announcements that over half of the North sea and oil gas reserves remain.  That alone ensures that this issue will play a major part in the independence referendum.  The House of Commons Energy and Climate Change select committee has also this week criticised the UK Government’s recent “£10bn raid on North Sea oil profits”.

The other taxation issue that received a lot of coverage was the independent referendum and the number of options given.  The main question will be a yes or no to independence.  It is though a possible second question that has ignited so much debate.  A possible second question is likely to be a yes or no to greater fiscal and tax powers, but short of independence, for the Scottish Parliament.  How “short” is the tricky part.  There are a lot of options between the Scotland Bill proposals and full fiscal autonomy.

The press have termed this option “devo max”.  As one of the authors of Reform Scotland’s “fiscal power” papers I can confirm that one of the hardest issues is trying to find a suitable title.  Other terms commonly used are: fiscal responsibility, “home rule” and fiscal autonomy.  It will be interesting to see this debate develop.  Lots of questions.  Some of these include:

1. what is “devo max”?

2. who is going to define it?

3. who is going to campaign for it?

4. would the UK Government abide by a vote in favour of “devo max” but not independence?

5. what are the estimated costs and timescales?

Now to Europe and the latest agreement by the Eurozone countries.  One likely outcome of this crisis is that the  Eurozone countries will begin the process to more closely align their tax and fiscal policies.  Most commentators now seem to be saying that if you have a common currency you also need similar tax and fiscal regimes.  How “similar” is going to cause a lot of debate.  The debate has of course already started.  I have blogged previously on how hard the Irish government are fighting to retain its low rate of corporation tax.   It is not difficult to see the similarities with the Scottish independence debate as the  Scottish Government’s prefernce is to retain Sterling in the event of independence.

The debate over whether to retain the 50p rate of income tax was reignited this week when Paul Walsh, chief executive of Diageo, said that: “the 50p rate threatened to cause long term damage to Britain’s competitive edge”.  Paul Walsh’s comments contrast with those of Sir Stuart Rose, the former head of Marks and Spencer’s, who has supported the 50p rate.   George Osborne has of course commissioned a study on the revenues being received from the 50p rate.  That said, the debate is much wider than just the question of how much revenue is being raised.  The debate is just as much about the perceived fairness of the UK’s tax system.  It was ever thus.

Now to the so called “Retail tax levy”.  The Scottish Retail Commission claim that the proposed levy on major supermarkets selling alcohol and cigarettes breaches the Scottish Government’s own business rules by not carrying out an impact study on any such change.  The Scottish Government responded that as the levy only affects 0.1% of retail turnover the cost of a Business and Regulatory Impact Assessment would be disproportionate.  This debate is going to run and run I suspect.

Now to Aberdeen and the news that the first phase of work to improve Aberdeen city centre has begun.  More than two thirds of firms in the area voted in favour of a Business Improvement District earlier this year.  The companies agreed to pay into a fund with the aim of raising more than £3m for work to help attract more visitors.  The first phase of work includes cleaning guttering and building facades to help improve the city centre in the run-up to Christmas.

Have a good weekend.


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Another week in “tax land”

Firstly to Belarus and Tax Information Exchange Agreements.  It was reported in this month’s STEP Journal that Belarusian human rights campaigner Ales Belyatsky has been arrested.  He was arrested soon after the Polish authorities gave the Belarusian authorities information relating to his bank accounts.   The Belarusian authorities had described him as a suspect in a tax investigation.  The Poles treated this as a routine request and handed over full details of his bank accounts.  He has been charged with tax evasion via a foreign bank account.  Belyatsky says the foreign bank account is used only to collect foreign contributions to his political movement.  The Polish Government has admitted it should not have disclosed Belyatsky’s bank details and has sacked the director and deputy head of its international cooperation department.

HMRC announced this week that approximately six million people are set to receive tax rebates averaging £400.  Another million people will learn they have underpaid their tax by about £600.  It is the second year that tax and National Insurance discrepancies have been identified by a new computer system.  HMRC said that the number of cases would reduce “as the new system beds in”.  Those who will be told they have not paid enough tax are expected to owe between £500 and £600 on average.  In a similar exercise last year, HMRC were criticised for being insensitive over their treatment of underpayers.  Another example of the complexity surrounding the UK tax system.

The Scottish Government announced a consultation on giving local authorities new powers to tax empty homes. The proposals would give local authorities the power to impose an extra levy of up to 100% of the standard charge. It is hoped that this could help raise millions of pounds to build new affordable houses.  The announcement stated that 25,000 properties have been empty for more than six months and are liable to pay council tax.  In Glasgow there are over 1,800 empty homes.  It is also claimed that if every local authority decide to use these powers they could raise up to £30 million per year.  I wrote about the connected issue of how local authorities are using funds gained from reducing the council tax discount in an earlier tax blog.  This blog can be found here.

This is something I have not come across before.  The Intergenerational Foundation called for tax breaks to encourage downsizing and help free up some of the estimated 25 million unused bedrooms in England.  The charity says that older people should be encouraged to move into smaller homes to help tackle England’s housing crisis.  The UK Government did not respond positively to this proposal.

Both sides in the battle over what independent schools have to do to justify their charitable status claimed victory last week.  The Independent Schools Council and the England and Wales Charity Commission are each claiming that the decision of the Upper Tax Tribunal vindicates their position. A similar debate is taking place in Scotland.  The tax issue here is the fact charities have a number of tax advantages including rates relief.

Now to the fiscal powers debate. Interesting to see Malcolm Chisholm MSP openly reject the Calman proposals. His comments mirror views recently expressed by former First Minister Henry McLeish.  Malcolm Chisholm is the first serving Labour MSP to openly reject the Calman proposals. The Scottish Government has renewed its call for control over Air Passenger Duty after the UK Government cut air passenger duty for Northern Ireland.  I also suspect that the Scotland Bill may be mentioned once or twice at the SNP conference which began yesterday.  The announcement that North Sea oil production will continue to at least 2050 ensures that oil and gas tax revenue is back at the top of the political agenda.

I have been asked to speak at Holyrood Magazine’s Scotland Bill conference on 8 November.  More information can be found here.  I can already hear myself saying: “does Scotland need a separate Registers of Scotland, Stamp Office, Companies House and Inheritance Tax office? Then again I have been making that point for 5 years now and no-one seems to be listening.

Have a good weekend.

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