Just as the weather in Scotland likes to tease us, so do the Tories over tax powers for the Scottish Parliament.  You can sense the nervousness growing in those opposing substantial tax and fiscal powers for the Scottish Parliament.  They feel that need to be saying something substantial but they just don’t know what to say.  They think that a hint of something substantial will be enough.

Look how the Liberal Democrats talked up their recent ‘Home Rule Commission’ report and the amount of power being devolved under Scotland Act 2012.  The reality as usual being very different.  My earlier blog on this can be found here.

So what have the Tories been saying, or rather hinting at?  Ruth Davidson has announced that yet another group will examine the existing devolution settlement in order to set out a clear alternative to independence in next year’s referendum.  A “clear alternative to independence”, I think not more a clear case of déjà vu.  More on this from the Scotsman can be found here.

The UK Government’s nervousness on the devolving of tax powers is not confined to Scotland.  The negative reaction it has received to one particular announcement shows how difficult a position it is now in.  The recent move to put off the decision to devolve corporation tax to Northern Ireland has not gone down well.  Peter Robinson, Northern Ireland’s First Minister said he had told the Prime Minister: “What, effectively, you are saying to the people of Scotland is that if you want more fiscal autonomy than you have at the present time, the only way to have it is through independence.”  More on this from the Herald can be found here.

Now to HMRC.  So much is happening with them just now it is difficult to keep up.

HMRC has announced that it is postponing payroll reforms for small businesses that require businesses to send real time information to HMRC amid fears that small businesses are unprepared for the changes.  More on this from the Financial Times can be found here.

The House of Commons Public Accounts Committee has also criticised HMRC target of answering 80% of tax enquiry calls within 5 minutes as “unambitious and woefully inadequate”.  It also found that Britons waste £136m a year attempting to get through to HMRC, with about 20 million of the 79 million calls received by HMRC going unanswered each year, despite spending £900m on improving customer service.  HMRC’s premium rate phone lines are also to be replaced.  Phone company Cable and Wireless is making a profit of about £1m a year from callers to HMRC’s 0845 enquiry numbers, according to a report by the House of Commons Public Accounts Committee.  The lines are to be replaced with cheaper 03 numbers. More on this from the BBC news website can be found here.

HMRC is also to close all of its 281 Enquiry Centres, which gave face-to-face help to 2.5 million people with tax queries last year.  The closures in 2014 by HMRC, which aim to save £13m a year, are expected to add 2 million extra calls to phone lines while also putting 1,300 jobs at risk, though the authority aims to deploy these staff elsewhere.  HMRC aim is to replace the Enquiry Centres with interviews in a range of convenient locations.  This might include a person’s own home or business.  We shall see.  More on this from the BBC news website can be found here.  The matter of how we deal with tax enquiries is an issue that we in Scotland also need to look at as we create a Scottish tax system.

Now to attempts by the UK Government to reduce tax avoidance.

A tax loophole that allows firms to escape £100m a year in National Insurance will be closed under a new scheme targeting offshore payroll services.  From April 2014 the UK government will prevent employers avoiding National Insurance Contributions by paying their staff through an offshore intermediary.  It estimates that at least 100,000 workers are now being employed through an offshore agency, often without their knowledge, losing tax contributions of £100m a year.  More on this from the BBC News website can be found here.  The question is: why has it taken so long to try and put a stop to this.

The number of UK-resident non-domiciles has fallen by almost a fifth since the “remittance basis charge” was introduced in 2008.  Non-doms can elect to pay tax on UK income alone and keep their overseas income out of the UK tax net.  But if they elect to use this system long-term, they must pay the annual remittance basis charge after seven years of residence. The charge starts at £30,000 and increases to £50,000 after 12 years of residence.  More on this from the STEP journal can be found here.

HMRC is to launch a campaign aimed at people who have failed to declare capital gains on the sale of a second home, possibly going back many years.  This is yet another long overdue measure.  More on this from the STEP journal can be here.

The Charity Commission for England & Wales has been criticised by the House of Commons Public Accounts Committee for failing to provide more substantial oversight of the sector after 50 organisations were found to be using charity rules to avoid tax.  More on this from the Telegraph can be found here.

Now to matters slightly further afield.

Let’s start with Cyprus and yet another banking disaster.  After much wrangling, Bank of Cyprus depositors with more than €100,000 could now lose up to 60% of their savings.  The original proposal was a one-off levy of up to 10% to be imposed on all bank accounts held on the island.  More on this from the BBC news website can be found here.

The UK should withhold extra aid to Pakistan unless the country does more to gather taxes from its wealthier citizens and tackle corruption, the House of Commons International Development Select Committee has suggested.  The UK Government is planning to increase the amount of aid to Pakistan to £446m by 2015 and the Chairman of the Committee, has said that it is a question of “how justified it is to increase [aid] at a time when [the] wealthiest people in Pakistan are paying little or no tax”.  More on this from the BBC news website can be found here.

Now to France.  President Hollande has announced that French companies will be taxed at 75% on any salaries they pay over €1m.  His original plan for a 75% top rate of income tax on individuals was struck out by the constitutional court earlier this year.  More on this from the Guardian can be found here.

Let’s end with a story from China.  According to reports, China’s property market has been thrown into turmoil by the announcement that capital gains tax on residential property is to be raised to 20%.  At the moment, the seller of a residential property pays between 1 and 2% of the total sale price. Officially, gains from selling second homes have been taxable for several years, but the tax has not been strictly enforced.  The measure is one of several just issued by the People’s Republic State Council in an effort to cool off the booming housing market.  More on this from the STEP journal can be found here.

One last thing.  Congratulations to Ryan Mania.  An absolute fantastic achievement today on winning the Grand National.  Another reminder of just how great it is to be from the Scottish Borders.

The debate over further fiscal powers, and in particular tax powers, for the Scottish Parliament is going to be a major issue as Scotland moves towards 18 September 2014.

Not many people know that there are over 25 taxes and duties.  The Scottish Parliament only controls two of these outright.  The other power over income tax has never been used and cannot now be used.

Even under Scotland Act 2012 the Scottish Parliament will only have control of four miscellaneous taxes and partial control of income tax.

If you would like to know more about the issues surrounding the tax powers debate and the creation of a Scottish tax system, whether under further devolution or independence, please contact James Aitken.

 james@legalknowledgescotland.com

The Tories are like a stuck record for those from a bygone era.

The press is reporting today that the Tories are again considering more tax powers for the Scottish Parliament.

Have we heard this before?  Of course we have.  Does anything ever serious come of it?  No.

Let’s put this in context.   There are approximately 25 taxes, duties and charges.  The Scottish Parliament presently only has control of two of them.  See my earlier blog on this which can be found here.  The 2012 Scotland Act does not take us much further.  The Liberal Democrat ‘Home Rule’ report goes nowhere near as far as the ‘Steel Commission’ or ‘Devo Plus’.

The Tories were against even minor tax powers being included in the original devolution settlement.  Many prominent Scottish Tories struggled to accept the Calman proposal of 4 miscellaneous taxes and partial control over income tax.  Partial control means no real control at all.

The UK coalition Government watered down the extremely timid Calman proposals in the 2012 Scotland Act.  Only two miscellaneous taxes were included and some control over income tax was removed.   I like to call this “Calman minus”.

How likely is it that the Tories will go as far as say ‘Devo Plus’ which devolves almost tax powers except for VAT and National Insurance, and devolves the majority of welfare powers?   I think that is a rhetorical question.

More on this from the BBC news website can be found here.

Let’s start with the independence debate.  Michael Moore has confirmed that the UK Government will not be bringing forward a proposal for further devolution.  I wonder if that will change if the opinion polls change.  This at least gives us a clear choice.  The choice being between “Calman minus” combined with the extremely unlikely scenario of Westminster devolving serious tax and fiscal powers after a ‘NO’ vote, and control over all tax and fiscal powers by 2016.

I think the ‘NO’ campaign has made a mistake here.  How those whose preferred choice is ‘devo plus’ or ‘devo max’ vote holds the key to which side wins in 2014.  Are they more likely to vote ‘NO’ as a result of Michael Moore’s statement?  The ‘NO’ campaign has not had a good start to the year.  The independence will cost £1 gaffe, support for the Scottish Government’s timetable for the transition to independence, the ridiculing of the claim that Scotland would need to ratify 8,500 treaties and then there was the loss of the UKs ‘AAA’ rating.  A serious proposal for further tax and fiscal powers would at least been a positive move by the ‘NO’ campaign and a change from the continuing negativity.

Now to a man who it seems can do anything.  Olympics gold medals, not a problem.  Forcing the HM Treasury into a u-turn, not a problem.  The UK Government has after all decided to grant a tax amnesty to non-resident athletes attending the London Grand Prix event this July. Olympic champion sprinter Usain Bolt announced that he would not attend unless his global earnings from sponsorship and endorsements were exempted, but until now HM Treasury had resisted the demand.  More on this from the STEP Journal can be found here.

A report by the House of Commons’ influential Public Accounts Committee says that promoters of so-called boutique tax avoidance schemes are “running rings around HMRC in a game of cat and mouse that HMRC is losing”.  It suggests that HMRC should publicly name those who sell ‘abusive’ schemes to as many clients as possible before HMRC shuts the scheme down.  This is estimated to cost the HM Treasury £5bn a year.  The Committee claimed that HMRC only knows about 46% of tax avoidance schemes, and that promoters who run the schemes find it unacceptably easy to put forward a “reasonable excuse” for not disclosing the scheme in order to escape a fine.  More on this from Accountancy Age can be found here and the Guardian here.

The UK government is to disqualify companies and individuals from bidding for public contracts if they have taken part in failed tax avoidance schemes.  This applies from 1 April 2013. Bidders will have to notify procurement departments if any tax return in the past 10 years has been found incorrect as a result of an HMRC challenge, or has contravened the Disclosure of Tax Avoidance Scheme rules.  More on this from HM Treasury can be found here.

A mansion tax is back in the news.  Although as it is a local taxation proposal it is not just a matter for the UK Parliament.  Local taxation is controlled by the Scottish Parliament.  A point missed by most reports.  The Liberal Democrats proposal would see either a 1% levy on homes worth over £2m or the introduction of new council tax bands for expensive homes.  More on the Liberal Democrat proposal from the Guardian can be found here.  The Labour Party has also announced plans to introduce a mansion tax on all homes worth more than £2m in order to fund the reintroduction of the 10p tax rate abolished in 2007.  More on the Labour proposal from the BBC News website can be found here.

An ongoing programme of jobs cuts helped play a major part in HMRC exceeding their cost-savings target for 2011/12, according to a report by the National Audit Office.  The report can be found here.  The figures give an indication of the scale of the cuts suffered by HMRC.  Spending slashed by £269m over the 12 months to 31 March 2012.  This was 19% more than the anticipated £249m.  A reduction of £140m was made by axing 2,400 full-time equivalent members of staff. The department plans to have lowered its running costs by £950m between the UK Government’s 2010 sending review and the end of the 2014/15 tax year.  It expects to see the loss of 10,000 full-time equivalent employees and 300,000 square metres of estate.

Press reports indicate that the inheritance tax nil rate band is to be frozen for several more years beyond the already announced date of April 2015, as part of the UK Government’s plans for funding elderly care in England.  More on this from the Herald can be found here and the BBC news website here.  Another example of the problem that can arise under devolution when the tax power remains at Westminster, inheritance tax, and control over an associated area such as social care is devolved.

Now to the least surprising story of the month.  The Confederation of British Industry has warned that the new Financial Transaction Tax announced by the European Commission may have a detrimental effect on UK jobs and growth.  Matthew Fell, the CBI Director for Competitive Markets, said: “it is particularly worrying that the increased scope of the tax will now cover businesses’ risk management activities, as well as hitting financial services in non-participating member states, like the UK, because of extra-territoriality”.  More on this story from the Telegraph can be found here.

Now to Europe and how the EU is demanding action against tax-planning.  The European Parliament’s Committee on Economic and Monetary Affairs has published a report proposing that member states revoke the banking licences of financial institutions that help their customers evade taxes.  More on this can be found here.

The heavy tax increases imposed by the Greek Government last year have actually caused a sharp fall in tax receipts. January’s tax revenues in Greece fell to €4.05bn, 16% down on the January 2012 figures, due to a collapse in consumption and a corresponding decrease in indirect tax payments.  More on this can be found here.

An interesting opinion piece can be found in the New York Times challenging the ‘Myth of the Rich Who Flee From Taxes’.  It was prompted by US Masters golf champion Phil Mickelson’s recent threat to decamp from California because the state’s top rate of income tax is increasing from 10.3 to 13.3%.  I agree with the conclusion reached.  It really is a myth although it does not stop those arguing against serious tax and fiscal powers for the Scottish Parliament from using it. The piece from the New York Times can be found here.

And lastly, well done to the Scottish teams who beat Ireland at the weekend.

Where to start.  So much has already happened in 2013.

Let’s start with the independence debate.  I had finally finished my chapter on “the battle for a Scottish tax system” and then another devolution proposal appears and Ruth Davidson almost says something of interest on the tax and fiscal powers debate.

The latest devolution paper is called “devo more” and it is from The Institute for Public Policy Research (IPPR).  I know it is difficult to keep up.  Again it starts from the premise of what is best for the UK not necessarily Scotland.  Personal income tax, partial control of VAT, excise duties on alcohol and tobacco and air passenger duty would be devolved.  Alan Trench, of the University of Edinburgh, who wrote the report, said it was “clear devolution must go further to meet popular demand and his plan minimises the adverse effects on other parts of the United Kingdom.”  The IPPR report can be found here.

It is a pity that there was not more interest shown in putting together a serious proposal for tax and fiscal powers for the Scottish Parliament during Calman.  Let’s not forgot that none of the “NO” parties  has come close to arguing for the powers recommended for devolving in “devo plus”, let alone “devo max”, to be devolved to the Scottish Parliament.  The Liberal Democrats have even gone backwards form what they proposed under the Steel Commission.  See my earlier blog on this which can be found here.

Then we had Ruth Davidson’s speech which promised a lot and delivered almost nothing.  Davidson promised no new tax or fiscal powers, no timetable for even considering the issue and no confirmation that she has moved on from saying that corporation tax and welfare powers should not be devolved.  What did she say, or rather what did she hint at:  “Sources close to Davidson confirmed that she will consider setting up a new commission to examine the devolution of more powers to the Scottish Parliament.”  For more on Davidson’s speech see Alan Cochrane’s report in the Telegraph which can be found here.

The stance of the “NO” parties is a continuation of what I call the “Calman doctrine”.  Do nothing unless under pressure, then if under pressure make a huge fuss about having someone look at the issue, take your time, offer as little as possible, exaggerate any problems, minimise or ignore any advantages and ensure HMRC and HM Treasury remain in control.

Time, and credibility, is fast running out for the “NO” campaign parties if they are to come up with a serious tax and fiscal proposal.  The most recent “Scottish Social Attitudes Survey” was clear.  Independence had 35% support and “devo max” 32%.  That is a clear majority for almost all powers, including tax and welfare powers, to be devolved to the Scottish Parliament.

Now to the UK tax system.  It seems that no-one is happy.

Two recent stories show why a Scottish tax system is needed.   The first one relates to carbon capture.  The article on this from the Herald can be found here.   The second relates to air passenger duty.  The article on this from the Scotsman can be found here.

Then there is the House of Commons Treasury Select Committee.  It has called for the re-establishment of a single annual UK Budget, saying that the UK’s Autumn Statement has increasingly taken on the character of a second Budget resulting in uncertainty and costs for business and the economy.  A report published by the Committee says:  “The primacy of the Budget as the main focus of fiscal and economic policy making should be re-established”.  More on this from the BBC news website can be found here.

The impressive chair of the House of Commons Public Accounts Committee, Margaret Hodge, has claimed that new tax laws are excessively influenced by major corporations and accountancy firms.  Hodge has argued that working groups set up by the UK Government to discuss tax reforms were overly dominated by those with vested interests in reducing their tax contributions.  More on this from the BBC news website can be found here.

Even business leaders are seemingly unhappy.  The UK Government’s plans to reform tax laws forcing large companies to be more transparent regarding their tax affairs have been criticised by business leaders.  The fear is that such laws would stifle the UK’s economic recovery as businesses would be reluctant to locate in the UK.  More on this from the Guardian can be found here.

HMRC offers poor value for money, according to a report by the National Audit Office.  The report claims that more than 20 million phone calls went unanswered last year, whilst callers who did get through were made to wait on average 282 seconds, up from 107 seconds last year, costing the public £33 million on call charges.  More on this can be found here.

It has been claimed that the UK Government will have raised taxes 300 times and ordered 120 tax cuts by the end of their proposed term of government.  More on this claim from the Telegraph can be found here.  One of the more controversial UK tax proposals is termed a “bedroom tax”.  More on this can be found here.

David Cameron has told the World Economic Forum conference in Davos that he will use the UK’s G8 presidency to launch a campaign against ‘unethical’ tax avoidance by multinational companies using ‘an army of clever accountants’.  The accountancy profession whilst I am sure not unhappy at being termed clever, took umbrage with what Cameron said.  More on this from the STEP journal can be found here.  Interestingly Cameron again brings ethics into the tax debate.  That said, does he intend to include the Crown Dependencies and the British overseas Territories in this campaign?  If not, this is nothing but a press release.

Members of France’s socialist cabinet have denounced the famous actor Gerard Depardieu, who has shifted his residence just over the Belgian border in order to escape the Hollande government’s tax rises.  Depardieu has retorted with an open letter to the newspapers, accusing the French Government of punishing success and talent, and offering to give up his passport.  More on this can be found here.

Let’s end with some news on a Financial Transaction Tax.  Eleven EU member states are to introduce a tax on financial transactions expected to generate £35bn in annual revenues.   As a tax avoidance measure, the European Commission has amended the relevant directive to catch any transaction where either of the parties is domiciled in the tax area, or is trading on behalf of a client in the tax area.  That will mean that this will also apply to some UK transactions.  The European Commission is now expected to present proposals on the detail of this new taxation scheme which will need to be accepted by unanimous agreement of the participating states.  More on this can be found here.   Whether to introduce a Financial Transaction Tax is just one of the many tax decisions Scotland will be able to decide for itself if it decides to vote “YES” in 2014.

Have a great weekend and in particular to all those representing Scotland this weekend.

Inner House case concerning an application to exercise a right to buy croft land at the Pairc Estate in South East Lewis. Pairc Crofters Limited was the owner of the land and had leased it to Pairc Renewables Limited. The Pairc Trust is the crofting community body which sought to exercise the right to buy. It sought purchase both the interest of Pairc Crofters as owner and the interest of Pairc Renewables as tenant.

The Scottish Ministers granted the trust’s application. Pairc Crofters and Pairc Renewables appealed to the sheriff. The sheriff referred the devolution issues arising from the appeal to the Inner House. The court required to consider whether Part 3 of the Land Reform (Scotland) Act 2003 (which contains the crofting right to buy) is incompatible with the European Convention on Human Rights. Specifically the landowners and their tenants claimed that Part 3 contravened Article 6(1) (right to a fair trial) and/or Article 1 of Protocol 1 (right to protection of property) of the Convention. If Part 3 had been incompatible with the Convention rights, the making of the 2003 Act would as a consequence have been outwith the legislative competence of the Scottish Parliament (in terms of the Human Rights Act 1998 and the Scotland Act 1998).

The landowner argued that Part 3 does not provide sufficient safeguards for landowner’s rights. Although A1P1 makes no mention of procedural requirements, the landowner contended that the procedure employed must give the proprietor a reasonable opportunity of putting its case to the decision maker. And, in the landowner’s view, Part 3 did not do that.

The court took the view that the landowner’s case depended on the proposition that the safeguards for a landowner’s rights required to have been explicitly spelled out in the 2003 Act. However, this is not the case. The question of competence depends on how the legislation operates in practice and not on how any specific provision may appear if looked at in isolation. (It may be that proper interpretation of the Act, the terms of other legislation, or the principles of the common law may restrict the impact of the Act so that it cannot be said to be incompatible with Convention rights.)

As regards Part 3 of the 2003 Act:

1. The provisions requiring the crofting community’s approval (to exercise of the right to buy) by ballot were compatible with article 6 (the right to a fair trial). Regulation 2 of the Crofting Community Right to Buy (Ballot) (Scotland) Regulations 2004 requires that the ballot be carried out in a “fair and reasonable manner”. In the event that the landowner considers the ballot to be unfair, it had a judicial remedy under the same regulation.
2. The exercising of the right to buy is at the discretion of the Scottish Ministers. Section 74(1)(n) of the 2003 Act requires that the applicant must in every case satisfy the Ministers that the proposed purchase is in the public interest. In making a judgment as to the public interest, the Ministers must act compatibly with A1P1 (right to protection of property). In assessing the broad overall consideration of the public interest, the Ministers must take account of the interests of persons who may be adversely affected by the decision, such as the landowner. When the Ministers decide where the overall public interest lies, the central consideration will be that of balancing the harm to the landowner against the benefit of the proposal to the wider public.
3. The 2003 Act gives the landowner adequate means to put forward his case. On receipt of the community body’s application, the Ministers are obliged to invite a number of interested parties, including the landowner, to submit their views in writing on the application (s 73(8)(a)). The Ministers are then under an express obligation, when considering whether to grant the application, to have regard to all views that have been received (s73(12), (13)). In addition to the statutory procedure the Ministers also have a duty at common law to observe such additional procedural safeguards as are necessary to attain fairness.
4. Lastly, the legislation provides for an adequate level of scrutiny of the factual issues that an application to exercise the right to buy may raise. It does so in three separate ways:
   1. in the requirement of the details that the crofting community body must provide in the prescribed form of application;
   2. in the requirement that the Ministers must invite views on the proposal from interested parties, including the landlord, and from the public; and
   3. from the right given to any interested party, again including the landlord, to refer any question relating to the application to the Land Court.

The Inner House found that, when considered as a whole, the legislative provisions and principles of administrative law offer a level of protection “equal to or surpassing that” which is required by the European Convention on Human Rights.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

The UK Supreme Court has found that sections 1 and 9 of the Tobacco and Primary Medical Services (Scotland) Act 2010 are within  the legislative competence of the Scottish Parliament.

(Section 1 of the 2010 Act prohibits the display of tobacco products in a place where tobacco products are offered for sale. Section 9 prohibits vending machines for the sale of tobacco products)

A summary of the judgement is available from the Supreme Court here.

The full judgement is available here.

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

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

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

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

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

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

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

Now to the tax avoidance debate.

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

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

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

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

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

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

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

Now to matters slight further afield.

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

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

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

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

A lot has been written in the past dew weeks about the attitude of a number of international companies to paying UK corporation tax.  This issue is though only one of a number of matters that needs to be addressed.

Is there the political will to reform the UK’s tax system?  I would argue no.  What evidence do I have for this?

1. The reluctance of the UK Government to address the paying of corporation tax by large international companies.

2. There is a lot of talk of tax simplification but the reality is very different.  The new reduced rate of inheritance tax is but one example.

3. If the UK Government was serious about reforming the tax system we would be at least be debating publishing summaries of business tax returns and other ideas to increase transparency.

4. The introduction of morality into this debate does not help matters.  A robust tax system should not need to rely on what is and what is not “moral”.

5.  Fairness is though crucial.  The perception is growing that tax for certain sections of our society is optional.  This needs to be addressed as a matter of urgency.   The fact that it is increasingly difficult to tell what is “tax avoidance” and what is “tax evasion” does not help matters.

6.  The fact that the UK Government has allowed so many public sector people to be employed through service companies is nothing short of disgraceful.   This added to the perception of a lack of fairness.

7. The UK Government seemed to immediately say it would not introduce a Financial Transaction Tax because it was a European proposal.  The lack of a proper debate again added to the perception of a lack of fairness.

8. If the UK Government did care about the quality of UK’s tax system why have they made such deep cuts to HMRC’s budget and staff numbers.

This though is not just a UK Government matter.

It was reported a couple of months ago that a number of so-called celebrities were involved in schemes, perfectly legal, to reduce the amount of tax they paid.   The furore, if that is what it was, did not last long.  If the public do not seem to care too much about this issue then the UK Government might conclude it is not that important.

These issues apply just as much to the Scottish Government as further tax and fiscal powers reside in Edinburgh.

Let’s start with an issue that is at last beginning to reach the top of the political agenda, tax avoidance.

The UK National Audit Office has released a report suggesting that HMRC is being “overwhelmed” by the scale of tax avoidance, claiming that the UK is losing out by more than £10bn in lost tax revenue.  The Comptroller and Auditor General, Amyas Morse, stated: “HMRC must push harder to find an effective way to tackle the promoters and users of the most aggressive tax avoidance schemes”.  But according to the NAO, between 2004 and 2011 approximately 2,300 avoidance schemes were disclosed to HMRC.  A report on this can be found on the BBC news website which can be found here.  The NAO report can be found here.

That shows the scale of the problem.

Then there is the sight of a number of Chief Executives from several of the world’s top companies giving evidence to the House of Commons Public Accounts Committee on the issue of tax avoidance.  Representatives from Google UK, Starbucks and Amazon were answering questions on tax arrangements for multinational companies.  Their responses show how big business views this issue and interference by politicians.  More on this from the BBC news website can be found here.

Also on this issue.  The Managing Director of John Lewis, Andy Street has said that the failure to resolve the issue would risk driving UK firms out of business.  Street’s comments were aimed at Amazon, which is accused of failing to pay the correct rate of UK corporation tax. He said that UK companies would be “out-invested” and “out-traded” by the US-based internet retail giant.  More on this from the Telegraph can be found here.

There is also some evidence that HMRC is losing this “battle”.  The European Court of Justice has ruled that the UK Government must refund several UK-headquartered multinationals up to £5bn worth of corporation tax.  The companies, led by British American Tobacco, were found to have been treated unfairly by HMRC which retrospectively blocked tax refund claims dating as far back as 1973.  HMRC said it was “very disappointed” at the ruling.  Glad that it was not “happy”.  More on this, again from the Telegraph, can be found here.

Then there is the tax tribunal decision in favour of the former Rangers Football Club.   The decision of the first tier tribunal was not unanimous and HMRC is considering an appeal.  More on this from the Scotsman can be found here.

An example of what HMRC is trying to do also highlights the scale of its task.  HMRC has launched a taskforce to pursue landlords in the south east of England who fail to declare rental income.  It is expected to recover £4m out of the estimated £550m of tax evaded annually by landlords across the UK.  A press release from HMRC on this matter can be found here. 

The statement from UK Business secretary Vince Cable sums up nicely the quandary for politicians.  Cable has called for action against corporate tax avoidance but also stressed the need to encourage investment.  He pointed to anger amongst small and medium sized businesses that multinational corporations are able to avoid tax without consequence.  More on this from the Scotsman can be found here.

I liked this: “High-street shops turn fire on Amazon’s tax avoidance”.  More on this can be found here.

Now to the fiscal powers debate.

Edward Troup, the person responsible for the collection of the Scottish rate of income tax at HMRC, has told MSPs that the Scottish Government would have to pay the costs of any changes to the Scottish rate of income tax.  More on this from the Scotsman can be found here.  This is in fact one of the reasons why I think a tax needs to be devolved in its entirety.

Also on this issue, and some sensible observations by Iain Gray, convener of Holyrood’s Audit Committee.  Gray said that the Scottish Parliament must be able to exercise greater oversight of HMRC when the Scottish Parliament will become responsible for raising half the income tax in Scotland from 2016.   More on this from the Herald can be found here.

The Devo Plus group, which was set up by Reform Scotland, has published its latest paper on further powers that could be devolved to the Scottish Parliament as long as Scotland votes NO.  More on this from the Scotsman can be found here.  The paper  can be found here. Notable that the Conservative representative acknowledged that he was there in a personal capacity and not representing his party.  Ruth Davidson has of course made her opposition to further powers clear.  The problem with this approach is an obvious one.  Can anyone say with a degree of certainty that major powers will be devolved to Scotland if Scotland votes NO.  To see how far apart the opposing sides in the independence debate are have a look at one of my recent blogs.  This blog lists the tax powers that Westminster has already said no to.  My earlier blog can be found here. Even the Liberal Democrats, the party that historically has went the furthest on this issue, now wishes to devolve only a handful of additional tax powers.

Now to some commentary on the recent Institute for Fiscal Studies report on the economic possibilities of an independent Scotland.  The excellent piece by Ian Bell in the Herald can be found here.  The argument that Scotland’s oil wealth is a potential problem for Scotland is simply ridiculous.

The Times has reported that sales of homes valued between £2m and £5m in Greater London have fallen by 29% per cent in the third quarter, according to figures from the Land Registry.  I was interested to read that “industry experts” have blamed the fall on changes to stamp duty land tax in the last UK Budget.  London Central Portfolio, a high-end residential property investment fund, said: “The fall in transactions is almost definitely a result of the uncertainty and negative sentiment caused by the tax changes announced in the 2012 Budget”.  It seems that uncertainty can be caused by something other than the debate on Scottish independence. The report in the Times can be found here.

And finally to France.  The French Government has announced new measures against tax avoidance and fraud for companies and individuals. Failure to disclose the origin of offshore assets will attract an automatic 60% tax rate.  The French tax authorities will also demand an explanation of all individual payments exceeding €200,000.  Vive la France.