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

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

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

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

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

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

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

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

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

Let’s start with “GERS”.  No not the blue half of Glasgow but the: “Government and Expenditure Revenue Scotland 2010-11”, or GERS for short.

The latest GERS report was published this week and shows that Scotland contributed 9.6% of UK public sector revenue and received 9.3% of total UK public sector expenditure.  These figures include a per capita share of UK debt interest payments.  Scotland’s population is 8.4% of the UK total.  Scotland’s estimated current budget balance in 2010-11, which is primarily day to day expenditure, was a deficit of £6.4 billion, or 4.4% of GDP.  These figures include a geographical share of North Sea revenues.  The corresponding UK figures were a deficit of £97.8 billion or 6.6% of GDP for the same year.  That includes 100% of North Sea revenues.

As is usually the case with statistics, and probably even more so with those which are used as ammunition in the fiscal powers debate, economists and other commentators will argue back and forth on what these facts and figures tell us.  That is why I agree with Reform Scotland’s call for the Office for Budget Responsibility to provide forecasts for all taxes raised in Scotland and not just those that might be devolved by the Scotland Bill.  Reform Scotland’s press release can be found here.  More on GERS can be found here.

Now to the fiscal powers debate.  This week it was Labour’s turn to announce a “commission that will look at how devolution should change and what further powers should be devolved to the Scottish Parliament.”  This means that none of the main political parties are arguing for the status quo or even just the Scotland Bill.  The Liberal Democrats have already announced their own commission and the Conservatives, or rather the UK Conservatives by way off the Prime Minister, have said that they will consider devolving further powers if Scotland votes no in 2014.

The announcement of yet another commission received quite a lot of media of coverage.  The fact that Labour think a second referendum will be required if Scotland votes “no” in 2014 was less commented upon.  I suspect that this will also be the view of both the Liberals and the Conservatives.  That clearly conflicts with the argument that Scotland needs an early referendum to stop “uncertainty”.  An article on this from the STV news website can be found here.

Aberdeen City Council is expected to apply for more than £90m of tax incremental funding (TIF) following a ‘yes’ vote in the Union Terrace Gardens referendum.  A report on this from the STV news website can be found here.  I have written before on why I support TIF and the type of thinking behind this type of idea.  The one caveat I have concerns the number of these projects. As was found in the United States, if too many projects are approved the ability to fund both old and future projects gets harder.  The Scottish Futures Trust is though well aware of what happened in places such as Illinois, where I worked as an attorney, and first came across TIF.  More on TIF can be found here.

I was not surprised to read that a last minute bid to stop the Scottish Government’s plan to levy a tax on supermarkets and large shops has been defeated.  The “Tesco tax”, as this proposal has been termed, will see retailers which sell alcohol and tobacco pay an extra £95m in business rates over the next three years.  A BBC news website piece on this can be found here.

Sometimes when you read a story about the workings of government, local or national, you just sigh.  This is one such story.  Whitehall departments have been criticised for overspending by £500m on schemes that were actually intended to save money.  The National Audit Office found that UK ministers failed to offer clear management for the setting up of pooled resource centres.  The aim was to stop costs being duplicated.  The ever excellent Labour MP Margaret Hodge, who chairs the House of Commons Public Accounts Committee, said that the overall figures provided: “a shockingly familiar story of spiralling costs and poor value for money”.  Will anyone be brought to account?  Will a gong have to be returned or a bonus forfeited?  I suspect not.  A BBC news website piece on this can be found here.

Now to the Budget debate.  For “debate” read “battle between and briefing against your coalition partners.”  There are a number of fronts in this battle.  These include how quickly to increase the personal allowance limit, whether to reduce higher rate pension tax relief, the possible introduction of a “Mansion” tax and whether to retain the 50p top rate of income tax.  Is it worth speculating as to the outcome of these battles?  Not really.  Fun though that would be this is a political game pure and simple.  The “winner” will be the side who at that moment has the most power not necessarily who has the best ideas.  It was ever thus.

The more interesting debate, and this has just really begun, concerns whether and to what extent wealth as opposed to income should be taxed.  That is where the debate is going.  I will come back to this issue after the UK Budget.

One final point on the so called “Mansion tax”.  I do find the lack of commentary on the fact that local taxation is devolved to the Scottish Parliament amusing.  Can you imagine the Scottish Parliament’s reaction to the UK Government interfering with one of the few tax powers it has?  Let’s call that a rhetorical question.  We do know how the UK Government reacts if the Scottish Parliament or the Scottish Government dares to do something that touches on a reserved matter.  Here are a few examples: free personal and nursing care, local income tax and minimum pricing for alcohol.

As with last week’s blog I will end with the French presidential election and news that Francois Hollande, the Socialist candidate, has announced plans to raise the top rate of income tax to 75 per cent on “indecent” annual incomes above €1 million. The use of the word “indecent” says it all.

Good luck to all our teams in action in Ireland this weekend.

I think I will start with VAT and the proposed new Scottish national police force.

It was reported this week that the proposed new Scottish police force may face an annual VAT bill of £22 million.  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.  The Scottish Government is currently in talks with HM Treasury to eliminate or minimise this potential financial liability.

I suspect that the Northern Ireland police force will be mentioned during these talks and in particular the fact that it has VAT exempt status.   So what is the problem you might ask.  The same exempt status will surely apply to the new Scottish police force.

The “just because it happens in Northern Ireland” argument does not always work with HMRC and HM Treasury.  Northern Ireland already has borrowing  and welfare powers.  Anyone involved in the Scotland Bill deliberations knows how hard HMRC and HM Treasury resisted calls for borrowing powers to be included.  They succeeded in ensuring that only restricted powers were included.  Welfare powers were not even seriously considered.  Northern Ireland is also to get partial control over air passenger duty and also possibly corporation tax.

In addition it seems that HMRC and HM Treasury cannot help but react negatively to any policy proposed by the Scottish Parliament that deviates from or impinges on reserved matters.  Examples include free personal and nursing care, local income tax, the Scottish Futures Trust and minimum alcohol pricing.  A report from the BBC news website on this issue can be found here.

Now to a surprise cut in council tax.  Stirling Council has become the only local authority in Scotland to reduce its council tax after councillors passed a budget on their second attempt.  The 1% cut, effective from 1 April, will see Band D council tax go down £12 from £1,209 to £1,197 a year.  Labour and Conservative councillors voted the measure through in an “alternative” budget after rejecting the minority SNP administration’s proposals.  More on this can be found on a BBC news website report which can be found here.

An article from the Evening News reports that The City of Edinburgh Council wants to investigate the idea of creating a “business improvement district” for Edinburgh’s tourism industry.  This would involve businesses making contributions to promote the city.  The article from the Evening News can be found here.  This is the latest in a series of revenue raising ideas from Edinburgh Council and of which I have written about previously.  See for example my blog of 9 December 2011.

Now to the fiscal powers debate and the latest group to enter the fray.  “Devo Plus” is a creation of the think tank Reform Scotland.  I should declare an interest as a former trustee of Reform Scotland and one of the authors of Reform Scotland’s “Devolution plus” fiscal powers paper.  I am though not involved in this campaign.  The position taken by the Devo Plus group is that they are opposed to “devo max” and independence and do not think the Scotland Bill goes far enough.  Instead they argue that the Scottish Parliament should be able to raise an amount roughly equal to what it is responsible for spending.  VAT and national insurance would remain in the hands of HM Treasury to ensure that Westminster was also accountable for its spending in Scotland.  It will be interesting to see what impact this campaign has in the coming weeks.  More on Devo Plus can be found here.

Now to the debate over the top rate of income tax.  Those arguing for the abolition of the top rate of income tax will be analysing preliminary UK Government statistics which suggest that the 50 per cent top rate of income tax has not raised any extra revenue.  A press release from Grant Thornton on this can be found here.

The “fuel duty discount pilot scheme for remote island communities” comes into operation today.  I was not surprised to see a report on the BBC news website of how HM Treasury had warned oil suppliers against attempting to profiteer from this scheme.  The report also notes that over the past week rises in the cost of fuel supplied to Orkney, Shetland and the Western Isles have been greater than the proposed discount.  Petrol and diesel at island pumps can be 20p more expensive than mainland prices.  I also read this week that the UK has the highest fuel tax burden in Europe with 60 per cent of the cost of unleaded petrol and 58 per cent of diesel made up of fuel duty and VAT.  I will resist the urge to make an ironic comment about North Sea oil.  The BBC news website report can be found here.

The BBC has reported that Barclays Bank has been ordered by HM Treasury to pay half a billion pounds in tax which it had tried to avoid.  Barclays was accused by HMRC of designing and using two schemes that were intended to avoid substantial amounts of tax.  The schemes, described as “highly abusive”, enabled the bank in question to avoid paying corporation tax on the profits it made from buying back its own debts, and to reclaim tax credits from HMRC on certain investment funds. The BBC website news report can be found here.

Now to a good idea.  A new “Assurance Commissioner” is to be appointed by HMRC following criticism from the House of Commons Public Accounts Select Committee about the relationship between HMRC and big businesses.  The following is from an article in the Telegraph and nicely sums up this matter: “In a move that amounts to a humbling mea culpa, HMRC is set to admit it needs to improve “transparency, scrutiny and accountability” after being publicly lambasted by the Parliamentary Public Acounts Committee over deals with Goldman Sachs and Vodafone.”  The article from the Telegraph can be found here.

I think I will end with France.  I will resist the urge to talk about last weekend’s game and instead mention a report by Reuters.  According to Reuters there has been a sudden rise in the number of French residents asking their wealth advisers about tax exile. They fear that the socialist party’s candidate Francois Hollande may win the forthcoming presidential election and increase wealth taxes.  I have heard similar claims many times before.  I have often wondered how many people actually leave.  I suspect not that many and, of those who leave, many regret doing so.

Have a good weekend.

I think I will start with the fiscal powers debate.

There have been two more important contributions during the last week.  Both the Prime Minister and the former UK Chancellor, Alistair Darling, have said that devolving further tax and fiscal powers should be considered if Scotland votes “no” in 2014.  These announcements are only the latest in a series of high profile statements on this issue. In fact the Scottish electorate is in danger of being crushed in the stampede of former opponents of serious fiscal autonomy announcing their very own Damascus type conversion.

What though of the friendless Scotland Bill?  There is an obvious opportunity here for those who are against independence but in favour of greater tax and fiscal powers.  There is time to amend the Scotland Bill and to give a clearer idea of how much power they believe should be devolved.  That would also mean that the PM would have to give us some idea of which additional powers should be devolved rather than simply refusing to answer the question as he did this week.  There could even be a clause in the Bill saying that the provisions do not come into force until after the referendum.

If this is not done, and there is a no vote in the referendum, we will have years of further debate on this issue.

Now to HMRC’s latest targeted tax avoidance campaign.  The contrast to how HMRC and HM Treasury, albeit with Ministerial approval, have helped dozens of high earners employed by the public sector reduce their tax bills, is a stark one.

As a former electrician, long story, I was interested to see that the top dogs in the world of tradesmen are next to be offered a partial tax amnesty by HMRC.  Those who accept will be charged penalties of only 10 to 20% of the tax owed rather than the 100% maximum available penalty.  A similar campaign concerning plumbers has so far led to ten arrests and thousands of investigations.  I have resisted the urge to explain the main difference between an electrician and a joiner.  More on this offer can be found here.  Worth looking at even for an example of HMRC humour which is found in the title.

Let’s stick with HMRC.  HMRC is about to start issuing penalty notices for 850,000 late self assessment income tax returns.  HMRC have also reported that a record 90.4% of taxpayers filed on time this year.  I do though look forward to reading some of the fantastic excuses that people have used to explain why their return was not returned on time.

Now to the UK Budget which is less than a month away.  Lots of rumours regarding tax relief on pensions and what the Liberal Democrats are “demanding”.  I expect to see more “stories”, for stories read “briefing against my fellow Ministers”, on the cost of bringing forward the planned increase to the personal allowance.  I also expect to see more calls for a reduction in business taxes and simpler labour laws from sources in the Conservative party.  For “sources” read “Liam Fox”.

To put the tax cut debate into context the UK has borrowed £93.5bn so far this tax year.  That is down from £109.14bn in 2010/11.  Tax receipts are though likely to be back to pre-crash levels this year.   As is usually the way with statistics both sides can quote these figures to back up their arguments.

Now to a warning by the body who regulates solicitors in England & Wales.  Practitioners who help clients reduce their stamp duty land tax liabilities may be risking disciplinary sanctions. The Solicitors Regulation Authority is especially concerned about residential property schemes.  More on this can be found here.  I will be interested to see if the Law Society of Scotland decides to issue a similar warning.

I liked the following from a story in the Herald: “Gangster tax”.  Strathclyde Chief Constable Stephen House believes that police should be allowed to keep a share of the ever growing haul of underworld assets seized under the Proceeds of Crime legislation.  This legislation allows for the civil recovery and confiscation of money, goods and property earned through illegal means.  The Herald article can be found here although registration is required.

Now to Europe.  Europe’s Tax Commissioner Algirdas Semeta has given a speech assuring the City of London that it will benefit from a European Union financial transactions tax.  Good to see the Telegraph covering both sides of this debate.  I was particularly interested in one point made by Semeta.  Semeta challenges the claim that ordinary citizens and businesses would bear the brunt of the tax.  Semeta is quoted in the Telegraph article that day-to-day financial activities will not be included and that 85% of the transactions take place purely between financial institutions.  The article from the Telegraph can be found here.

Now to Japan.  A piece on the BBC news website reports that the Japanese cabinet has passed a plan to double sales taxes in an attempt to control the soaring costs of public debts.  The plan, which needs the approval of Japan’s parliament, will see taxes raised from the current 5 to 8% in April 2014 and then up to 10% by October 2015.  The reason for this is that Japan’s social security costs are expected to rise by 1tn yen (£8bn) a year as its population ages.  It estimates 40% of the population will be of retirement age by 2060.  The BBC news website article can be found here.

Lastly I was disappointed to find out that there is no longer a Stamp Office presence at Registers of Scotland.  It we cannot even join up these two bodies then it is clear there is no appetite amongst either the politicians or the civil servants, whether of a Scottish or UK ilk, to review and hopefully consolidate the numerous tax, law and registration services that currently exist in Scotland.  Given the relatively small size of our country and the likelihood of greater tax and fiscal powers being devolved then this is clearly a case of sticking one’s head in the sand.

Have a good weekend.

Let’s start with the Scottish Budget.

The Scottish Government’s Budget was passed by the Scottish Parliament yesterday with the support of the Liberal Democrats.  The Budget outlines the Scottish Government’s £30 billion spending plan for the next financial year.

The amendment that stood out concerned the public health levy also known as the  “Tesco tax”.  The change will mean that instead of collecting £30m, £40m and £40m over the next three years it will bring in £5m less in each of these three years.  The Scottish Government claims that only 240 retail premises, around 0.1% of all business premises in Scotland, would pay more.  It will be interesting to see the reaction to this amendment.

Now to the news that over one million taxpayers face a penalty of £100 for failing to submit their self-assessment tax returns on time.  The figure of 1.1 million is the lowest since online filing first started and compares with 1.4 million last year and 1.6 million the year before.  These taxpayers will have to pay the £100 fine unless they have a reasonable excuse.  Valid reasons include serious illness, a bereavement, or a loss of documents because of theft, fire or flood.  After three months, additional fines of £10 a day start to accrue and could eventually amount to a maximum of £1,600.  More on this can be found in an article from the BBC news website which can be found here.

Two non football tax avoidance stories this week.  HMRC announced that its next planned crackdown will target construction workers.  Traders who carry out roofing, joinery bricklaying, window fitting and carpentry will be targeted.  The clampdown  follows other campaigns with doctors, dentists and tutors in the spotlight.  Interested but not surprised to see HMRC making it clear that they will use web searches to target those dodging tax.

The second story was extremely embarrassing for the UK Government and in particular Danny Alexander the Chief Secretary to HM Treasury.  This story concerned an arrangement reported to have allowed the Student Loans Company’s chief executive, Ed Lister, to avoid thousands of pounds in income tax and national insurance.  HMRC had authorised the SLC to make gross payments to Lester’s personal services company.

How could anyone at HMRC or HM Treasury think this was a good idea or could be justified? Am I surprised? No.  It seems that there is a section in these any other government organisations who just don’t get it.  The UK Government’s handling of the Network Rail bonuses is just another example of this attitude and I suspect, sadly, won’t be the last.  Thanks due to the BBC’s Newsnight programme for bringing the SLC issue to a wider audience.

BBC Newsnight journalist Richard Watson summed this issue up very well:  “In the current climate of national austerity and financial hardship, it’s hard to imagine a more politically charged story.  One of the most senior public servants in the land, paid by the taxpayer, granted special concessions to be paid gross through his private service company based at his home address.”

Now to an example of the carrot and stick approach to taxation and behavioural change.  I blogged about this issue last week.   The Scotsman reported this week that Scots who do not insulate their homes should be forced to pay higher council tax or face increased stamp duty land tax on their property.  Not sure about the stamp duty land tax point as it is the purchaser who pays that tax.  Nonetheless Alex McLeod, chairman of the Association for the Conservation of Energy told the Scotsman:  “… sticks as well as carrots are needed to encourage people to conserve energy in their homes.”

Interestingly the idea was attacked by a diverse range of bodies.  The TaxPayers Alliance branded the idea as “outrageous” and Friends of the Earth Scotland said that the Scottish Government should pay for everyone to have free insulation.  The article from the Scotsman can be found here.

Now to Westminster.  The jostling for position prior to the UK Budget in March continues.  This week it was Nick Clegg saying that Conservative plans to give married couples a tax break must take second place behind a proposed tax cut for low earners.  The UK Deputy Prime Minister, it has also been reported, wants his party’s plans to increase the threshold for income tax to £10,000 to take precedence over any move to recognise marriage in the tax system.

The House of Commons Public Accounts Committee has criticised HM  Treasury for the way it monitors government spending.  It seems that almost £11bn in unpaid tax has been written off without HM Treasury knowledge.   A report on the first set of “Whole of Government Accounts” by the Committee said that HM Treasury’s ability to identify financial risks needed to improve.  An article from the BBC News website on this can be found here.

Now to a worrying trend.  An increasing number of businesses are struggling to pay their tax bills after new figures show a growing number are using credit cards to make their payments.  During 2005/06 businesses made just over 6,000 credit card payments to HMRC for PAYE, corporation and personal tax bills.  This had increased to 365,000 for 2009/10.  The credit card payments in 2005/06 totalled more than £2m.  In 2009/10 it had increased to just under £486m.  Thanks to the Ashworth Law firm which conducted a Freedom of Information request to collate the data.

Now to Englandshire and a matter I have covered before.  Eighteen local authorities in England have rejected an offer of UK Government money that would allow them to freeze council tax.  You may remember Eric Pickles,  the UK Government’s Secretary of State for Communities and Local Government, recent comment that councils in England had a “moral duty” to freeze the council tax.  Clearly some councils in England beg to differ on this point.  I was going to say “let battle commence” but battle clearly has commenced.

So to Europe and an old favourite.  The Ernst & Young Item Club has calculated that the UK would be liable to pay 75 per cent of the revenues from the European Commission’s Financial Transactions Tax because of the size and scale of Britain’s financial services sector relative to the rest of Europe.  Even if the UK opts out it seems that the UK’s financial sector would still have to contribute about 60 per cent of total revenues if a “reverse charge mechanism” was applied.  Something for our politicians to think about.  They might also want to consider abolishing charging stamp duty and SDRT on shares transactions if a deal was done on FTT.  I suspect there is plenty of mileage left in this particular debate.

An interesting week for football north and south of the border.  The more interesting sport stories of the week also seemed to involve tax.  This should not come as a surprise given the amount of money that exists at the top end of this particular sport.  In simple terms it was ever thus.

Have a good weekend.

Let’s start with my favourite Chicago politician and the small matter of the next US Presidential election.

I was interested to read this week that President Obama is considering a form of “minimum taxation”.   The plan seems to be if you make more than $1 million a year you should not pay less than 30 per cent in taxes.  In addition if you earn more than $1 million a year you will not be allowed to claim any tax relief or deductions.  On corporate taxation no American company will be allowed to avoid paying its “fair” share of taxes by moving jobs and profits overseas.  Again multinational companies will be liable for a basic minimum tax.  I wonder if we will see our politicians thinking along similar lines in the near future.  I suspect that we will.

Now to the independence and fiscal powers debate.  Two major developments this week. Firstly sources close to the Prime Minister are reported to have said: “that a substantial increase in financial powers for Holyrood is not an option if Scotland wants to remain within the United Kingdom.”  If the UK Conservative party sticks with this line in the sand then how will those who support “devo max” or “devo plus” vote in 2014?  Will the Liberal Democrats and the main UK opposition party continue to support this policy?

Only time will tell as far as these questions are concerned.  One thing is though certain and that is the UK Government will face opposition on this point.  This week groups from the voluntary sector, churches, trade unions and the business community have formed a coalition to explore the possibility of a “middle-ground” option which is short of independence.  This group is termed “civic Scotland” and has the support of two think tanks Reform Scotland and the Centre for Public Policy.  For completeness sake I should mention that I am a former trustee of Reform Scotland and that I was one of the authors of Reform Scotland’s fiscal power papers.  I am though not involved with this group.

I was surprised that more was not made of the new statistics produced by HMRC this week.  UK tax receipts up to January 2012 show that total tax revenues in the 2010-11 fiscal year very nearly recovered to their pre-recession 2007-08 level and are set to be substantially higher in the current 2011-12 tax year.

Now to something we in Scotland are going to have to consider as tax powers are devolved to the Scottish Parliament.  It is easy to suggest a new tax.  Recent examples include a “bed tax” for Edinburgh.  Another possible new tax is the so called “bag tax”.  It was reported this week that Northern Ireland is to introduce such a tax from April.  Wales introduced a similar tax last year and the Republic of Ireland has had such a tax since 2002.  The Scottish Government is presently consulting on this issue.

As I said it is easy to suggest a new tax.  It is harder to explain what that tax is meant to achieve.  That should always be the starting point.  Are we looking to increase tax revenue or change behaviour or possibly a bit of both?  When environmental taxes such as aggregates levy and landfill tax were introduced the politicians struggled to answer this question.

I would also expect an explanation as to how the tax will be collected, the cost of collection and who carries that cost.  Any claim as to potential revenue also needs to be looked at closely and also put into context.  Most taxation revenue comes from just a handful of taxes.  Many of the UK’s minor taxes produce a relatively small amount of revenue.

Any new tax should also have a review date.  This ensures that any claims as to revenue or the cost of administration can be checked within a relatively short period of time.

Now to an update in the Scotsman on Edinburgh airport’s so called “kiss and fly” tax.  A total of 15p of every £1 generated by the charge for dropping off passengers beside the airport terminal is being channelled into its environmental fund.  The article can be found here.

Now to business rates and an excellent piece in the Scotsman newspaper.  The Scotsman reports that an unprecedented number of firms in Edinburgh have demanded reduced business rates as they struggle with a weak global economy and local difficulties such as tram works.  The article can be found here.

Now to Europe.  I was not surprised that President Sarkozy has decided to introduce a French financial transaction tax in August.  Will he still be in power then is of course another question.  The plan is to unilaterally impose a 0.1% tax on financial transactions.  The UK Prime Minister’s reaction was as expected.  Of greater interest is whether other European countries follow Sarkozy’s lead.

I have been following the Harry Redknapp trial with interest.  It is alleged that he received undeclared payments via a Monaco bank account from his former boss at Portsmouth Football Club.  Reports such as this one from the BBC News website, found here, make fascinating reading.

It seems that the Chief Executive of the Student Loan Company has his salary of £182,000 salary paid via a company and without tax being deducted.  The article claims that both HMRC and HM Treasury were aware of this arrangement which allows Ed Lester to pay corporation tax of 21% rather than up to 50% income tax on his earnings.  You have to wonder if the people who approved this arrangement have any sense of what is happening in the real world just now.  This is an excellent piece of journalism from the Guardian and the article can be found here.

Finally to more serious matters.  Good luck to new Scottish captain Ross Ford this weekend.  No pressure!

Have a good weekend.

The term “another week” does not seem appropriate as the title to this blog.

I do not remember all that much about the 1979 referendum and I was living in Chicago during the 1997 referendum.  Odd to think how much I do still remember about Argentina 78.  This week’s announcement ensures that 2014 will now be added to Scotland’s constitutional dateline.  A yes vote in the Autumn of 2014 leads to an independent Scotland by May 2016.  That is why this is not just another week.

What does a yes vote mean?  A yes vote means a Scottish Exchequer.  I have written about a Scottish Exchequer regularly over the last few years including in these blogs and the fiscal powers papers I co-authored with Reform Scotland.  Creating a Scottish Exchequer is not going to happen overnight.  We do though need to start somewhere.  Let’s start with the question: do we need separate HMRC and HM Treasury type bodes?  No.

We also need to look at what other institutions an independent or even a fiscally autonomous Scotland might need.  For example a one stop shop for all Scottish Government legal, registration and tax services.

We also now have to thinking about practicalities.  Would I copy en masse the UK tax legislation as exists in 2014 and declare that no changes will be made for two years?  Yes. This will ensure a degree of certainty for the general public and the business community.  Another advantage is that it would take some pressure off the new Scottish Exchequer.

I am sure I will come back to these and many other issues in the coming weeks and months.

I read with interest that Jeremy Paxman compared Scotland with Zimbabwe in an interview with the First Minister earlier this week.  I remember a similar point being put when I was giving evidence to the Calman Commission.  The transcript for this, page 478, can be found here.

Now to a question I was asked earlier this week.   How would I explain “devo max”.  Two areas need to be looked at.   Government spending and control over taxation.  The percentage that the Scottish Parliament has over each of these areas gives a good idea of how much autonomy it has.   Presently the Scottish Parliament has control over 60% of all government spending but only 7% of taxation.   The Scotland Bill increases taxation control to around 30%.   The latest Reform Scotland proposal, “devolution plus”, moves this closer to 70% for both government spending and control over taxation.  Fiscal autonomy or “devo max” would be around 90% for both government spending and control over taxation.  Fiscal autonomy does not reach 100% because control of VAT cannot be devolved with European Union states and foreign affairs, defence and some economic matters would still be controlled by Westminster.

The Liberal Democrats concerted campaign to dominate the news coverage in the run up to the March UK Budget  continued apace this week.   This week it was the UK Business Secretary, Vince Cable, calling for a mansion tax to be introduced on properties worth over £2 million.  It is estimated that a mansion tax could raise as much as £1.7 billion a year.  Nick Clegg, it is reported, also wants to speed up plans plans to increase the level at which income tax becomes payable, from its current £7,475 to £10,000.   This is presently scheduled for 2015.

Now to Europe.  I have previously blogged on how hard Ireland has had to fight to retain its low rate of corporation tax as a result of its bailout.  What is less well known is how the bailout might impact the Irish legal system.  Excellent article on this in the Law Society Gazette which can be found here.

Now to England and Eric Pickles, UK Communities Secretary, saying that councillors have a “moral duty” to sign up to the UK Government’s council tax freeze.  A moral duty to sign up to government policy.  A tax policy no less.  Interesting tactic.  Not surprisingly this has not gone down well with many English councillors.

More on business rates this week and the debate, for debate read spat, between the STUC and the FSB on the “Small Business Bonus Scheme”.  More on this can be found here.   Good to see that neither side used “morality” in their arguments.

Scottish Water has announced that its charges are to be frozen for the fourth year in a row.  The move means the average annual household charge from April in Scotland will remain at £324.  This is the same level it was in 2009-10.

Some more good news.   The UK Government has agreed to an income tax exemption for non UK competitors at the 2014 Glasgow Commonwealth Games.   This is something I have blogged about before and takes away another point of potential conflict between the Scottish and UK Governments.   Now that agreement has been reached on this and the fossil fuel levy fund I wonder which other niggly issue could be dealt with next?  How about adding aggregates duty, air passenger duty, corporation tax and alcohol duty to the Scotland Bill?  Likely to happen?  No.

One last point.  If you have still not dealt with your tax return please do so as soon as possible even though HMRC have effectively put back the deadline for two days due to possible strike action.  HMRC’s new penalty regime is not something you want to have to deal with.

Have a good weekend.

Given that I am working in Dundee this week this seems like the best place to start.  Dundee is also my favourite Scottish city.  The plans for the town centre and the waterfront are very impressive.

So why is Dundee in the news this week?  Scottish Finance secretary John Swinney named a series of “hubs” where incentives will be offered to companies in manufacturing, life sciences and low carbon renewable energy.   The ports of Dundee and Leith is one of two low carbon and renewables areas proposed.   A number of questions remain to be answered including what are these “incentives”.  For example a reduction in business rates?  The announcement from the Scottish Government can be found here.

Also on business rates. The Scottish Chambers of Commerce called for the planned rise in business rates to be reconsidered.  The rate is planned to rise by 5.6% in April with the figure based on last September’s inflation rate.  This week saw the CPI rate of inflation fall to 4.2%.

Where shall I start?

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

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

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

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

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

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

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

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

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

Have a good weekend.