Time for another “tax land”.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Have a good week.

Great to see progress at last on a Scottish tax system.

One of the first steps is the Scottish Government’s consultation: Taking Forward a Scottish Land and Buildings Transaction Tax.   The consultation document can be found here. 

The consultation runs to 30 August 2012.

Not a great week for the UK Government and in particular George Gideon Oliver Osborne.  The problem here for the coalition government is not just the fact that there has been three U-turns in one week, it is the feeling that the March Budget was a bit of a shambles.  I would not go as far as that but it does seem a bit odd to me that so much was made of the so called “pasty” and “caravan” taxes and not that the UK Government did not even consider reducing VAT on repairs and renovations on residential property. 

As suspected the proposed cap on tax relief for charitable donations has been dead in the water for a number of weeks.  All we heard this week was  confirmation of that fact.  One final point on this.  These three U-turns come at a cost of approximately £150m.  Where is that revenue now to come from?   

“Flat rate” taxes were all the rage a few years ago.  Personally I have not been persuaded by the arguments put forward.  That said, as we start to think about how a Scottish tax system might look flat rate taxes should also be considered.  The latest call again came from those generally regarded to be on the political “right”, the TaxPayers’ Alliance and Institute of Directors.  In addition to arguing for a single rate of income tax the usual noises were made for the tax system to be simplified.  No-one is likely to argue against a simpler tax system until specific proposals are made.  For example, recent changes to the amount of personal allowance for those aged over 65.  This change has been termed the “granny tax”.  I did though like the idea of abolishing certain taxes although not necessarily those listed in this report.  It is claimed that the cost of these proposals would be met by prolonging the UK Coalition’s spending cuts by an extra five years.  More on this can be found here.  The report also claims that these changes would increase gross domestic product by 8.4% over 15 years.

Again on tax rates.  According to City A.M. the UK has continued to raise taxes while most other European Union countries tax rates have fallen.  The European Union average top rate of income tax decreased from 44.8 to 38.1% between 2000 and 2012.  In this same period, the UK’s average rose from 40 to 50% although the top rate is to fall from April 2013.  Unless of course we see another U-Turn.  The UK has though followed the European Union wide trend for raising VAT.  The average rate has risen from 19.2 to 21%, with the UK’s up from 17.5 to 20%.  The report from City A.M. can be found here.

Some stories do not surprise you in any way.  This is one of them.  Taxpayers are spending more than £1 million every month on the rent and upkeep of empty fire service control rooms that have never been used.  Details revealed under Freedom of Information legislation show that only one of the nine Fire Control centres is operational, despite the fact that taxpayers will continue to pay for their upkeep for up to 20 years.  This was reported in the Times on 24 May. 

Then there are stories that do surprise you but shouldn’t.  This is one of them and is also a story I have covered recently.  3,000 civil servants are employed by private firms in order to keep their tax bills down.  By remaining off the UK Government’s payroll, thousands of officials are avoiding paying national insurance contributions and are able minimise their overall tax contributions.  The report from HM Treasury can be found here.    

Good news that could have been even better news.  HMRC collected an extra £4.32bn during the last five years.  This is 11 times greater than the investment made for collecting this extra revenue.  However, a House of Commons Public Accounts Committee report claims that another £1.1bn could have been collected without job losses at HMRC.  A report on this from the BBC news website can be found here.

The International Monetary Fund (IMF) and in particular its managing director Christine Lagarde, is rarely out of the news these days.  Lagarde has said said that the UK economy had underperformed and unemployment remained much too high.  The IMF urged the UK Government to consider cutting interest rates and a further round of quantitative easing.  Ms Lagarde also said that UK ministers should prepare a plan for a worse economic environment which could include a cut in VAT.  However, the IMF also said that the UK Government should not divert from its aim of deficit reduction.  A report from the BBC news website can be found here.    

How to win friends and influence people.  Political parties in Greece have criticised Christine Lagarde for suggesting that Greeks were avoiding paying taxes.  Socialist leader Evangelos Venizelos accused Ms Lagarde of “insulting the Greek people”.  A report, again from the BBC news website, on this can be found here. 

There may be trouble ahead.  The UK Supreme Court has ruled that HM Treasury breached European Union law by retrospectively blocking tax refund claims.  The amount involved could be as much as £5bn.  Not surprisingly, HMRC has said that it is “considering the implications of this complex judgement carefully.”   A report on this from City A.M. can be found here. 
 
Now to what some might consider an overreaction.  Some US politicians are so irked at the idea that Americans are renouncing their citizenship to avoid tax, that they are introducing a new Senate bill to tax them forever.  A report on this from ABC news can be found here.  In addition, Congress is close to approving a law under which the Internal Revenue Service will be able to revoke the passports of Americans who owe substantial unpaid taxes.  An article from the Wall Street Journal on the passport claim can be found here. 

I think I will finish with fiscal powers.  HMRC is under no obligation to implement any tax proposal made by the Scottish Government under the Scotland Act.  HMRC can effectively veto any proposal if it differs too greatly from the UK system.  A report on this from the Herald can be found here.  I find it worrying that anyone is at all surprised about this.  I would be even more worried if I thought that anyone actually believes that HMRC and HM Treasury are happy to see tax powers being devolved.  I suspect that there are very few people in HMRC and HM Treasury who are happy to see the beginning of the end for a unified UK tax system.  An earlier blog on this point can be found here.     

Also on fiscal powers.  I still think it is unlikely that the so called “second question” will be asked as part of the independence referendum.  What will those who are arguing for “devo plus” and/or “devo max” do?  Will they vote for independence or the status quo and the hope of something more in the future?  This is an issue I will come back to after my well deserved holiday.  

Have a good weekend.

Let’s start with the recent local government election.  I was disappointed that none of the main parties, of which Scotland now only appears to have three, put forward any serious proposals for reforming how we pay for our local services.  There is though one body actively campaigning on this issue and that is the think tank, Reform Scotland.  An article in the Scotsman on this can be found here.  Reform Scotland want our local authorities to have the power to decide whether to adopt a property tax such as the Council Tax or a land value tax or instead opt for an income tax, a consumption tax or a number of different local taxes.

Now to fiscal powers and the fact that National Insurance turns 100 in July.  100 not out but for how much longer?  The idea of combining income tax and National Insurance was considered by a working party as long ago as 1993.  The main reason for this is the erosion of the link between National Insurance contributions and welfare benefits.  This issue is again being looked at.  Do I think we will see a complete merger?  No, unless both income tax and National Insurance are controlled by the Scottish Parliament.  This is an example of how a Scottish tax system could create a more simplified system.

Again on fiscal powers.  I was not surprised to see a number of Conservative MPs arguing for a “Devo Plus Bill” as part of an “alternative Queen’s Speech”.  This was published on the Conservative Home website.  Conservative Home support the Reform Scotland proposal which would devolve all taxes to Scotland except VAT and National Insurance.  More on this can be found here.

Now to a group of people termed “High Net Worth”.  HMRC has announced that its High Net Worth Unit’s tougher approach on wealthy taxpayers has resulted in an extra £200m of tax revenue.  David Gauke, Exchequer Secretary to HM Treasury, said: “The Unit’s approach ensures that HMRC is working as effectively as possible with the very wealthy and that they are contributing a fair share”.  This was reported in the Financial Times on 6 May.  The article also claims that the amount collected by this Unit has doubled since it began operations in 2009-10.  The aim is for £560m by 2014-15.  This does though beg the question: why was this Unit only set up in 2009?

Now to a claim that the UK Government Minister for Civil Society, Nick Hurd, was never consulted about the cap on charitable tax relief announced by HM Treasury in March.  More on this from the STEP journal can be found here.  The UK Government has been at sixes and sevens on this policy.  I will be surprised if it survives the summer.  Unless of course summer is already behind us.

Again from the STEP Journal.  1.6 million people should have received letters by now from HMRC warning them that they have been undercharged tax under the PAYE system and will have to pay extra.  Another 3.5 million people will be given a tax refund.  The STEP article can be found here.  An example of the sheer scale of the UK tax system and the problems it faces.

Good to see that the Scottish Government’s prosecution service has passed 20 cases of large scale tax avoidance to HMRC for investigation.  An article on this from the Scotsman can be found here.  The referencing of Al Capone must be compulsory when journalists write about this subject.

Sometimes an argument just makes you shake your head.  The Scottish Government has announced that the minimum price for alcohol will be 50p.  Although this proposal has received a huge amount of support, the leader of the CBI in Scotland has warned that supermarkets are likely to receive millions in extra revenue from drink sales.  That of course is true.  So why is this organisation against the devolving of control of alcohol duty to the Scottish Parliament and the Scottish Government’s Public Health Levy (also known as the “Tesco tax”)?  There is of course no need to answer that question.  An article from the Scotsman on this can be found here.

It seems that top rates of personal income tax across the Organisation for Economic Cooperation and Development (OECD) countries have begun to rise again in recent years after three decades of steady reductions.  The OECD press release can be found here.  Let’s not forget one of the main reasons for the reduction.  Politicians decided that “stealth taxes” were a better option.  For “better option” read “will help me get elected”.  The economic crisis put paid to that “cunning plan”.

“A serial killer is stalking the wealthy suburbs of Athens with an idiosyncratic choice of victims. They are all rich Greeks who have failed to pay their taxes, and their corpses have been left scattered among the ruins of the ancient city, dead of hemlock poisoning, the means of Socrates’ execution.”  This is the plot of the latest bestselling novel by Petros Markaris, who has combined the roles of thriller writer and social commentator in Greece to such an extent that he has become one of the most widely quoted voices in the crisis.  The article on this from Business insider can be found here.

Now to a story that combines sport, tax and the financial crisis.  Diego Maradona is suing the Italian government for £40m, despite owing it £32m in unpaid taxes.  Only in Italy!  The article from the Metro can be found here.

Lastly, an update on an issue I wrote about recently.  Co-founder of Facebook, Eduardo Saverin, is one of the thousands of wealthy Americans to have renounced his citizenship recently in order to avoid the country’s international taxation regime.  An issue for those planning a Scottish tax system to ponder.  An article on this from the STEP journal can be found here.

Have a good week.

Where to start?  Tax and morality seems as good a place as any.

Cardinal Keith O’Brien has accused David Cameron of acting immorally by favouring the rich ahead of ordinary citizens affected by the recession.  The cardinal also denounced David Cameron’s opposition to a “Robin Hood tax” on financial institutions.  Those arguing for a European financial transaction tax have gone a bit quiet recently.  The cardinal’s interview has though brought this proposal back into the news.  Whether a tax such as this is introduced is though only part of the debate.  As with most taxation debates the secondary debate involves how the revenue should be spent.  The cardinal would like it spent helping the poor and vulnerable at home and abroad.  Others want an emergency fund for the next banking crisis.  An article from the BBC new website on this can be found here.

Now to the London mayoral debate. Included in Boris Johnson’s manifesto for a second term is a proposal to set up a commission that would explore the possibility of a “Barnett” style formula for London.  Johnson wants to keep more of the tax raised in London to be spent in London.  An article on this from the Guardian can be found here.  This is further evidence of how quickly the fiscal powers debate is moving.

The Scotland Bill has received its Royal Assent.  An article on this from the BBC news website can be found here.  A missed opportunity?  I think so.  That said, even under the Scotland Act (2012) we are going to have a Scottish tax system.  I am of course looking forward to the Scottish Government’s consultations on the tax powers being devolved but why stop there?  It is surely now obvious that we need to start thinking about the type of tax system we want.  That must include a review of all government tax, law and registration services and the creation of a Scottish Exchequer.

Good to see an article in the Herald on something I have written about recently.  Businesses in new Scottish enterprise zones will be able to claim up to 100% business rates relief as part of new incentives to stimulate investment in the economy.  Other measures announced by the Scottish Government include more efficient planning procedures, improved broadband, targeted capital allowances and international marketing.  The article in the Herald can be found here.

Another article from the Herald, this time on an “unprecedented” number of business rates appeals.  The article reports that court cases have been launched by retailers in Edinburgh, Glasgow, Dundee and Kirkcaldy and elsewhere as firms contest the size of their rate bills.  The article from the Herald can be found here.  The main argument being used is that the current rates were calculated in 2008, before the extent of the downturn became apparent.

For those of you interested in tax statistics, the relevant HMRC page can be found here.  For those of you interested in tax consultations, current HMRC consultations can be found here and current HM Treasury consultations here.  There will be many more consultations added over the next few months as the UK Chancellor in his Budget made reference to approximately 45 consultations.

Approximately 12,000 people who had been told that they no longer needed to fill in self-assessment tax forms have been sent penalty notices in error.  To put this in context, 130,000 people were taken out of the self-assessment process for this tax year.  Some 850,000 people were sent penalty notices for failing to submit their tax returns on time this year.  This is 550,000 fewer than a year ago.  An article on this from the BBC news website can be found here.  As mentioned in this article it is likely that “HMRC’s resources” played a part in this latest error.

Nearly 60,000 more Scottish pensioners than first thought will be hit by the UK Government’s decision to freeze age related personal allowances according to new figures published by HM Treasury.  The figures show the so called “granny tax” will impact 423,000 pensioners in Scotland by 2015-2016.   The article from the Herald can be found here.

David Cameron has backed proposals for an “airline levy” to ease waiting times at London Heathrow Airport border control.  Airlines using London Heathrow would pay higher landing fees to pay for additional UK Border Force staff to help remedy the long queues currently occurring.  You would be forgiven for thinking there was an election in London this week.  The UK Government is not making many friends in the airline industry just now.  The spat over increases in Air Passenger Duty continues.  More information on this can be found in an article on the BBC news website found here.

Now to Europe and the “debt crisis” debate.  Financial Times journalist, Gideon Rachman continues to argue against European countries trying to spend their way out of their debt crisis.  This is a quote from his article:  “There is, of course, scope for argument about the pace of deficit reduction.  But in a highly-taxed, highly-regulated, highly-indebted continent like Europe, more state-funded public works would simply build another road to nowhere”.  The full article can be found in the Financial Times on 1 May.

I will finish on a matter I have blogged on before.  More than 2,000 public sector workers could be avoiding the full rate of income tax through special contracts, UK Government research has found.  An article on this from the BBC news website can be found here and my earlier blog here. This is an incredible figure as it does not include those in the NHS or local government.  Danny Alexander is seemingly “shocked”.  It seems that “shock” is becoming the default reaction for UK Government Ministers.  You may remember George Osborne’s was also recently “shocked” at the extent of tax avoidance.  Tax and morality it was ever thus.

Have a good weekend.  “Tax land” will be back in three weeks time.

Where to start?

The fall out surrounding the UK Chancellor’s Budget statement continues.  The House of Commons Treasury Select Committee has said that the Chancellor’s plans to scrap the 50p tax rate don’t add up.  In addition it criticized the numerous Budget leaks.  An article on this from the Daily Mail online can be found here.

I am surprised that more has not been made of the change to the 40p income tax band.  One of the arguments put forward for reducing the top rate of income tax was the effect it was having on entrepreneurship.  I cannot see how massively increasing the number of people liable to pay income tax at the 40p rate compliments that argument.

Then there is the charity furore and the apparent contradictions in the arguments put forward by the UK Government in support of this policy.  The fact that some UK Government Ministers fought extremely hard to reduce the top rate of income tax is well documented.  Now the UK Government is criticising the fact that rich people don’t pay a high enough rate of income tax.  In addition, the UK Government has made it clear they wish to increase charitable giving.  Only a year ago, in the 2011 Budget, the UK Chancellor announced proposals to support giving, such as a lower rate of inheritance tax for those leaving 10% of their estate to charity.  The UK Government started by saying that the policy is needed by alleging that high earners are using donations to dubious charities to reduce their income tax bill to almost zero.  Now it is talking about fairness.  Will this policy even survive the summer?  An article from the STEP online journal on this issue can be found here.

HM Treasury has released figures showing the extent of tax avoidance by the UK’s so called “super rich”.  Robert Peston has written an excellent article on this.  His comment on the contrasting approach taken by George Osborne and his Labour predecessors is particularly noteworthy.  If the report does tell us one thing, it is how complicated a picture this is.  One fact does though stand out.  73% of those earning over £250,000 were paying an average tax rate above 40% in 2010/11. Robert Peston’s article from the BBC news website can be found here.

Good to see the Church of Scotland entering the earnings and taxation debate.  A Kirk commission has issued a report on the “greed and inequality” of the bonus culture and tax avoidance.  An article from this from the Herald can be found here.

Now to what is expected of HMRC in the next year.  HMRC’s remit for 2012/13 is:

• improving tax collection
• delivering cost reductions
• improving services for individual and business customers
• Real Time Information
• tax policy and the policy partnership

The context to this is fewer staff and a smaller budget.  More on this can be found here.

The Scottish Parliament this week endorsed a legislative consent motion which effectively allows the UK Government to pass the Scotland Bill, also known as “Calman minus”, at Westminster next week.  Have I anything else to say on this?  No.  The term “Calman minus” says it all.  An article from the Scotsman on this can be found here.

The Guardian reported recently that Amazon’s tax affairs are being investigated in the US, China, Germany, France, Japan and Luxembourg.  HMRC have refused to confirm whether it is also investigating Amazon.  Amazon is the largest retailer in the UK.  The Guardian also reports that Amazon paid no UK corporation tax last year.  This is primarily because the US parent in 2006 transferred ownership of the main Amazon.co.uk business to a Luxembourg company.  It is not just the UK Government that is being asked questions about this company.  The Scottish Government is also being asked questions relating to a £10m grant.  Of course if the relevant tax powers were devolved to the Scottish Parliament, the left hand might have more of a chance of knowing what the right hand is up to.  Articles from the Scotsman and the Guardian on this matter can be found here and here.

Another week and another VAT issue.  The Church of England fears church renovation projects could be scrapped because of planned changes to VAT set out in the UK Budget.  From October this year HM Treasury will charge VAT at 20% on approved alterations to listed buildings.  Presently this is exempt from VAT.  The Church of England thinks the change will cost it £20m a year.  HM Treasury says funding will be available to ensure church renovations are not cancelled.  A report from the BBC news website on this can be found here.  The BBC report notes that a “source close to Chancellor George Osborne is reported as saying that this proposal was about ensuring a millionaire wanting to build a swimming pool in the garden of their listed mansion had to pay VAT on it.”

HMRC is improving and streamlining its processes for customers who need to deal with them following a bereavement.  HMRC is creating dedicated teams who will be responsible for dealing with PAYE and Self Assessment for bereaved customers.  The main form which customers use to finalise the tax affairs of the person who has died, R27, has been redesigned following feedback from customers and tax specialists to make it easier to complete.  More on this can be found here.

A “fat tax” is back on the agenda.  The Academy of Medical Royal Colleges has called for stronger measures to reduce obesity in the UK.  The first phase of the Academy’s campaign will try to find out what works.  It will review evidence for diets, exercise, taxation, minimum pricing and changing advertising and food labeling.  The Academy has also blamed the UK Government’s previous strategies and irresponsible marketing for aiding to obesity issues.  An article on this from the BBC news website can be found here.

There are suggestions that the German Government’s recent renegotiation of its withholding tax agreement with Switzerland may tempt the UK Government to try and do the same with its own Swiss agreement.  The UK Government has though already changed it once already.  An article on this from the Guardian can be found here.

Let’s finish with the “Buffett Rule” as it sounds like it might be about food and I am feeling peckish.  Sadly, the Buffett rule is not about food but instead a tax plan that would apply a minimum tax of 30% to individuals making more than a million dollars a year.  An editorial in the Wall Street Journal calculates that the Buffett Rule, which is supported by President Obama, would lose $80bn a year from USA federal tax revenues.  The US Senate has in fact this week voted to block the Buffett Rule.  The article from the Wall Street Journal can be found here and a BBC website news report on the Senate vote can be found here.

Have a good weekend and good luck to all the teams competing at Scottish Rugby’s Cup Final day at Murrayfield on Saturday.

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.

For those of you struggling to sleep at night, may I recommend the latest UK Finance Bill.  According to the accountants Grant Thornton, at 686 pages, it is the longest Finance Bill in UK history.  The Finance Bill can be found here.  I am reluctant to even mention the fact that the UK Government has announced 45 tax consultations in case you stop reading.

I enjoyed Jeremy Peat’s comment piece on the UK Budget.  Jeremy comments on the 50p rate of income tax, the 40% income tax band, the economy and lending.  I particularly liked this comment: “What about incentives? Well, one effect of the Budget is to drag very large numbers of folks into the 40p tax band. Logically, I would have thought the adverse effect on the incentives of this substantially larger group would be expected to be [much] greater than any positive incentive effect from reducing the top rate to 45p for a much smaller group.”  If you are registered with the Herald website you can find all of Jeremy’s article here.

Now to the fiscal powers debate Italian style.  It is claimed that Italy’s prosperous German speaking South Tyrol autonomous province wishes to buy its financial independence.  South Tyrol has a population of around half a million and already has a large amount of autonomy. Up to 90% of tax revenue stays in the region, while the other 10% goes to Rome.  South Tyrol was occupied by Italy at the end of the WWI and annexed in 1919.  After WW2 the Allies decided that the province would remain a part of Italy, but would be granted a large amount of autonomy.  The article that I came across on Twitter can be found here.

“Devo max” for London?  An interesting article from the London Evening Standard can be found here.  I am surprised that Boris Johnson has not made more of an issue of this before now.

Last week I mentioned the report by the David Hume Institute on the debts and liabilities that an independent Scotland may be responsible for.  The report also made reference to the fact that the UK has approximately £821bn of “assets”.  I was glad to see that the “asset” side to the fiscal powers debate continued this week.  An article in the Scotsman on this issue by Jennifer Dempsie can be found here.

It seems that any new charge is automatically labelled a “tax”. My first example is from Dundee and a so called “tax on creativity”.  Members of Dundee’s licensing committee have decided to postpone implementing a controversial act that it is claimed could hinder the city’s arts scene.  The rule would have required exhibitions or public shows put on by the artists, gallery owners, musicians or publishers to be licensed from 1 April, even if they were free.  With the cost of a licence ranging from £124 to £7,500, artists said many free shows and exhibitions would simply not take place. The background to this is the Criminal Justice and Licensing (Scotland) Act 2010.  An article from the Courier on this can be found here.

My second example has been termed a “property extension tax” by the Daily Mail.  The Mail reported this week on how planning permission fees for property extensions will increase from £160 to £300 in Scotland.  The Mail compared this with the £150 charge in many English local authorities.

Now to the unsurprising news that charities have banded together to protest at the capping of donor tax relief that was announced by George Osborne in his Budget statement.  Two leading umbrella bodies, the National Council for Voluntary Organisations and the Charities Aid Foundation, have set up a website calling on Osborne to exclude charities from the proposed cap.  More than 200 organisations have already signed up to support the campaign, called “Give It Back George”.  Principals of five Scottish universities are among those signatories to a letter asking the UK Government to abandon this proposal.  The campaign website can be found here.  An article on this from the Scotsman can be found here.

An article in the Herald claims that this week’s 8% rise in Air Passenger Duty (APD) will lead to a 46% growth in HM Treasury’s revenue from APD by 2016.  It does seem that APD makes the news every week.  The reason for that is how APD is at the centre of a number of debates.  The airline industry would like to see it abolished or at least reduced.  Then there is the call for it to be devolved to the Scottish Parliament.  The UK Government has already signalled its intention to partially devolve APD to Northern Ireland.  Worth also noting that until recently the environment would be mentioned in the context of APD.  That though now rarely happens.  How quickly things change.  An article from the BBC news website can be found here.  If you are registered with the Herald website an article on APD can be found here.

The Guardian reports that the House of Lords Financial and Economic Affairs Committee has warned against the planned European Union financial transaction tax.  That is not a surprise.  What is interesting about this article is that it covers a possible alternative to the proposed financial transaction tax.  The alternative is the introduction of national stamp duties on share transactions, which the UK already has and which France is set to follow in August.  The Guardian article can be found here.

Now to Ireland and news that almost half of Ireland’s 1.6 million households have refused to register to pay the new €100 annual tax on residential property by the 31 March deadline.  The mass non-compliance was organised through an Internet campaign and backed by protest marches.  The levy, which also applies to foreign owners, is expected to rise sharply next year.  A report on this from the Irish Times can be found here.

Swiss authorities have issued warrants for the arrest of three German tax inspectors.  The three are accused of buying a CD containing bank client data stolen from Credit Suisse in Zurich, which led to the investigation of hundreds of German taxpayers with undeclared Swiss accounts.  The Prime Minister of North-Rhine-Westphalia has come to the defence of the tax inspectors and has said that the tax inspectors were only doing their duty.  Given the escalating war of words between these countries in this issue, I suspect that this matter will run for a while yet.  A report from Spiegel online can be found here.

Good luck to Edinburgh Rugby this weekend and also to those competing at the new look Gala RFC sevens.  I wonder if any politicians will be pictured eating hot pasties or sausage rolls at these events.  Have a good Easter weekend.

I will start with where to find one of the most comprehensive and detailed review’s of last week’s UK Budget statement.  The link is to the always impressive Institute of Fiscal Studies and can be found here.  In particular see the “Business tax, stamp duty and anti-avoidance slides”.  Slide 9 on “Forecast revenue from anti-avoidance measures” is particularly revealing.

Now to the fiscal powers debate.  I was disappointed to see that Peter de Vink has been deselected by the Scottish Conservatives.  Peter was hoping to be elected to Midlothian Council in May.  As far as the fiscal powers debate is concerned this shows that there are some on the centre right in Scotland who can see the opportunities that fiscal autonomy or independence could bring.  Peter’s article in the Herald can be found here.

The First Minister has announced the setting up of a “Fiscal Commission Working Group” to establish a fiscal framework for an independent Scotland.  The group will include former World Bank Chief Economist and Nobel Prize winner Jospeh Stiglitz of Columbia University.  My only slight concern relating to this group is that it comprises four economists, albeit eminent economists.  This group needs to ensure it has an understanding of the underlying law and legal framework that is crucial to creating a new fiscal framework for Scotland.  That includes the creation of a Scottish Exchequer.  I will once again reiterate my call for a review of all government tax, law and registration services in Scotland.  A Scottish Government press release on this can be found here.

I was also interested to read about a report by the David Hume Institute which claimed that an independent Scotland would be liable for around £100bn of debts and liabilities.  In particular I was interested to see one of the first references to the “other side of the balance sheet”.  The report says that the UK has approximately £821bn of “assets”. The £100bn figure comes from deducting £69bn of assets from approximately £152bn to £171bn of debts and liabilities.  A Scotland on Sunday article on this story can be found here.  This particular part of the fiscal powers debate has a long way to go.

In advance of May’s local government elections, Reform Scotland has called for non-domestic rates to be devolved in full to local authorities.  This would mean a variable business rate in different areas of Scotland.  The Reform Scotland paper can be found here.  Non-domestic rates is one of two tax powers presently devolved to the Scottish Parliament, the other being council tax.  Although these taxes are administered by the local authorities control rests with the Scottish Parliament.

The proposal would also mean that local authorities would keep the revenue they collect from business rates.  At the moment this revenue is handed back to the Scottish Government.  The Scottish Government then redistribute it as part of its grant to each local authority.  The Reform Scotland proposal could also be used as a framework for when control over the Crown Estate is devolved to the Scottish Parliament.

According to a study carried out by accountancy firm UHY Hacker Young, Edinburgh businesses contribute more to the UK economy per head of population than any other major city in the UK.  The main reason given is that Edinburgh wasn’t hit as hard by the financial crisis as London.  In addition, oil-rich Aberdeen was the only major UK city to see its economy grow during the recession.  This is excellent news for the Scottish economy.  An article from the Scotsman on this can be found here.

Now to corporation tax.  The Financial Times recently reported on how 15 multinational companies are considering locating substantial operations in Britain as a result of UK corporate tax reforms.  What I found most interesting about this report is when tax competition is discussed in a UK context it is a positive thing.  Contrast this with the tone of the debate over devolving control over corporation tax to the Scottish Parliament.

Continuing on the corporation tax theme.  It is not just the headline rate of tax that is important.  The underlying law which deals with, for example, reliefs is just as important.  Further evidence for this is shown by a recent statement by the European Commission.  The European Commission are claiming that the UK is breaking European law by imposing an immediate capital gains tax charge on companies that relocate to another EU member country.  The Commission has requested that the UK abolish this exit tax within two months, or be referred to the European Court of Justice.  I await the reaction to this by the UK Government with interest.  The statement from the European Commission can be found here.

The Unoccupied Properties Bill has been introduced at Holyrood.  At the moment empty and unfurnished residential properties are exempt from council tax for the first six months.  After that period, they qualify for a 10% discount.  Under this Bill local authorities will be given the power to charge up to twice as much council tax on residential properties that are empty and unfurnished.  It is hoped this will act as an incentive for home owners to bring their empty houses back into use.  The Scottish government has also announced a new loan fund which will be specifically targeted at projects bringing properties into use for affordable housing.

The new bill will also controversially reduce the non-domestic business rates discount for some empty commercial properties from 50% to 10%.  The argument put forward is that this will encourage owners to bring boarded-up shops back into use.  A report from the BBC news website on this can be found here.

Now to England.  Over 85% of local authorities have accepted the UK Government’s offer to freeze council tax rates.  This is contrast to the agreement reached between the Scottish Government and all of Scotland’s local authorities.  England’s local authorities were offered a one-off grant worth 2.5% of their budget if they agreed to the freeze.  More on this can be found here.

Let’s end with Wales and the news that the Welsh Government has started to consult on whether Wales should be a separate legal jurisdiction.  The Welsh government will ask the judiciary, lawyers and members of the public whether they want a jurisdiction along the lines of those found in Scotland and Northern Ireland.  An article from the Law Society Gazette on this matter can be found here.

Have a good weekend.

As with any Budget statement, it is best to take a few days before passing judgement.  That said, and even before all of the detail has been analysed, there are a number of issues that stand out even just 24 hours after the Chancellor sat down.

The first concerns the debate, for “debate” read “leak everything”, that has surrounded a large number of Budget issues over the last few months.  We have a come a long way from the days when Gordon Brown did not even tell Tony Blair what was going to be in the Budget statement.

The proposed reduction in the top rate of income tax has dominated the political news coverage over the last few months.  The debate over how much it has raised will not end with the Budget statement.  There is no doubt it has led to a great deal of tax avoidance, aggressive tax avoidance.  That was to be expected.

The changes to the personal allowance and tax rate thresholds, has already begun to dominate the news coverage.  The coalition government must be hoping that the news coverage concentrates on the increase in the personal allowance and not the 300,000 more people who will be drawn into the 40% income tax rate from 2013/14.  To put this in context.  In the 1980’s approximately 5% of people were higher rate taxpayers.  Now it is 15%.

The freezing of age related allowances is also likely to cause problems for the coalition government.  Somehow they need to show that this is a good example of tax simplification.

The claim that does stand out is that by reducing the top rate of income tax, combined with other avoidance measures, five times more tax will be raised from the richest.  The Institute of Fiscal Studies noted today that that this is the third worst Budget statement for measures relating to tax avoidance.  This is measured on how much tax the avoidance measures to be introduced are likely to save.

Now to an old Budget favourite, stamp duty and Stamp Duty Land Tax (SDLT).  The SDLT changes were not unexpected especially for anyone who buys a Sunday newspaper.  The Chancellor announced that the level of stamp duty on residential properties over £2m which were bought via a company would increase to 15% with immediate effect.  In addition, overseas companies that already own UK residential property worth more than £2m will be subject to capital gains tax (CGT) from April 2013.  The CGT point was less expected but nonetheless welcome.  This though should have been dealt with many years ago.  The Chancellor also made it very clear if avoidance of this kind continues, further measures would be introduced without warning which have retrospective effect.

That though is not the main issue with SDLT in Scotland.  In Scotland only around 10 properties a year are sold that are worth over £2m.  The jump from 1% to 3% of SDLT at £250,001 is a much bigger issue.  Hopefully that will be one of the first issues dealt with when this tax is finally under the control of the Scottish Parliament.

One change I was hoping to see, in vain I might add, was a targeted VAT reduction for home repairs and renovations.    

Now to the fiscal powers debate.

The UK and Scottish Governments have agreed a number of changes to the Scotland Bill.  Both Governments will now recommend that their respective Parliaments support the Bill.  A number of minor changes have been agreed.  The Scottish Government has secured changes to the sections of the Bill dealing with borrowing powers and the Supreme Court.  It was also agreed that the measures contained in the Scotland Bill would only be implemented with the agreement of the Scottish Parliament.

The proposed reservations of insolvency procedures and regulation of health professions will also be removed preserving the Scottish Parliament’s existing legislative competence for these areas.  More on this can be found on the Scottish Government’s website which can be found here.  The list of proposed amendments agreed by both the present, and previous, Scottish Parliament Scotland Bill committees is also listed.  These lists show how few changes have been made to this Bill.  A report from the BBC news website on this matter can be found here.

The House of Commons Scottish Affairs Committee has said that the Crown Estate’s control of 50% of Scotland’s coast and almost all the seabed should be devolved to Scotland’s local authorities.  The Scottish Affairs Committee said management of the marine environment lacked transparency and public consultation.  It is now difficult to find someone who is opposed to devolving this power.  Does that mean the Scotland Bill will be further amended to include this power?  I suspect not.  More on this can be found on a report on the BBC news website which can be found here.

I was intrigued to see the Secretary State for Scotland, Michael Moore, asking for tax clarity from the Scottish Government and in relation to the independence referendum.  There is a simple answer to this question, and which would provide a degree of certainty for individuals and businesses alike.  There should be no major changes for two or even three years to the tax legislation, and system of administration, that the Scottish Government inherits in the event of a “yes” vote.

I was not surprised to read that the Scottish Government is struggling to persuade HM Treasury that the new Scottish police and fire services should be exempt from VAT.  This is likely to mean an annual VAT cost of between £22 and £36m.  Under the current structure police forces are treated like local authorities and are exempt from VAT.  However, if they merge they may be subject to VAT.  A report on this from the BBC news website can be found here.  My earlier blog on this can also be found here.

The new definition of a charity will apply to all UK charity tax reliefs from April 2012.  More information on this can be found here.  I still find it odd that when it seems that everyone is talking about tax simplification, that bodies wishing to become a charity have to meet various conditions set by OSCR (Office of the Scottish Charity Regulator) and then by HMRC.  The reason for this is that the definition of a charity in Scotland is different from that used in England and Wales.  HMRC apply English and Welsh law.  This means if Scottish charities wish to claim the various UK charity tax reliefs then they also have to submit an application to HMRC.  What utter nonsense.  If the UK Government were serious about tax simplification, the fact that you are registered as a Scottish charity should be enough to allow a charity to claim the various UK tax reliefs.  The same issue applies in Northern Ireland as it now has its own charity regulator.

I was interested to see that the European Parliament has finally voted to approve the cross border inheritance law proposed by the European Commission to clarify which jurisdiction’s succession law should govern an international estate. The UK and Ireland remain opted out of the regulation.  A report on this from the BBC news website can be found here.

François Hollande, the Socialist candidate for the French presidency, has provided more detail of his plan for a 75% top rate of income tax.  He now says there will be a ceiling on the total tax paid by an individual in one year; and that the rate will be only temporary until the public sector budget is balanced.

Finally to Greece and some encouraging news.  The head of the European Union’s Greek task force, Horst Reichenbach, has reported the collection of almost €1bn (£830m) in back taxes.  Almost double the target figure.  A good start but still a fraction of the amount outstanding as they believe there is around €8bn in uncollected tax revenues.  More on this from a report on the BBC news website can be found here.

Have a good weekend.