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

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

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

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

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

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

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

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

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

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

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

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

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

Now to matters slightly further afield.

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

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

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

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

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

More on this can be found here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Now to the tax avoidance debate.

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

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

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

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

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

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

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

Now to matters slight further afield.

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

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

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

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

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

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

That shows the scale of the problem.

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

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

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

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

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

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

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

Now to the fiscal powers debate.

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

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

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

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

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

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

Where to start.

In a speech to mark her first year as Scottish Conservative leader, Ruth Davidson outlined an aspiration to cut income tax by more than 1p when new powers come to Holyrood.  More on this from the Scotsman can be found here.  Now compare this with a survey that claims that three quarters of Scots think taxes should be raised for those with the highest incomes and wealth. More on the survey from the Herald can be found here.  These stories show how Scotland, both the politicians and the general public, are beginning to wake up to the fact that tax is not necessarily just a UK matter.

The Scottish Government has backed the latest call for control over air passenger duty to be passed to the Scottish Parliament.  This is a matter worth remembering when you hear comments from the NO campaign on how they “hope” to give the Scottish Parliament further powers.  Let’s not forget how few tax powers are included in the latest Scotland Act.  It is “Calman minus” just as the Liberals recent Home Rule Commission is “Steel minus”.  More on this can be found here.

First it was Rangers now it is Hearts that is in trouble with HMRC.  The surprise is no-one is surprised.  Hearts owe HMRC approximately £500,000 in unpaid tax.  More on this from the Scotsman can be found here.

The UK Government seems to be doing a fair bit of thinking just now which is always worrying.

The UK’s Chancellor of the Exchequer, George Osborne, has called for a change in international tax standards to reflect changes in business, such as the rise of e-commerce, which makes it easier for companies to shift taxation away from jurisdictions where profit is being generated.  More on this from the Guardian can be found here.  In addition, Danny Alexander, the Chief Secretary to the UK Treasury, has pledged to crack down on corporate tax avoidance following revelations that the supermarket chain Asda may have used overseas transfers to its parent company Walmart to avoid up to £250m in tax.  More on this from the Times can be found here.  Lots of words but can we expect real action?

The Chief Executive of HMRC, Lin Homer, has been put under pressure by the UK Treasury Select Committee to explain why multinationals have been allowed to pay less tax than small businesses in the UK.  The Comptroller and Auditor-General of the National Audit Office, Amyas Morse, said that large companies often put pressure on HMRC by threatening to pull out of the country altogether.  More on this from the Times can be found here.  A connected story from the Daily Mail and involving Margaret Hodge, chairman of the UK Public Accounts Committee, can be found here.

Under “road charging” proposals being considered by the UK Government, motorists could face a new two-tier system in which drivers would pay a lower rate of tax if they do not use the UK’s trunk road network.  Have any of the UK media outlets considered the fact that this is also a matter for the Scottish Parliament?  Of course not.  The new system would comprise a basic charge for the use of local roads, and a secondary charge for those motorists wanting to use motorways and A-roads.  More on this from the Guardian can be found here.

Is it just me or is it really the case than almost every change in the law is met with the accusation that it breaches some part of EU law?  The latest example is the UK Government’s planned changes to child benefits.  The UK Treasury has dismissed the claims by the Institute of Chartered Accountants of England and Wales.  More on this from the Telegraph can be found here.

David Gauke, Exchequer Minister to the UK Treasury, has argued that HMRC needs to pay more to recruit the best tax experts in order to combat tax avoidance by major multinational companies.  Edward Troup, Director-General for Tax and Welfare at HMRC, welcomed the proposal, saying: “I think it’s on the record now to have more staff and higher pay”.  More on this from the Times can be found here.  This is an issue that we in Scotland will also have to respond to when setting up our own tax system.

It is often claimed that that the UK Government favours London and the south-east of England. This is another such claim.  The UK Communities Secretary, Eric Pickles, has faced criticism from property groups and retailers after his announcement that a revaluation of business rates has been pushed back to 2017.  The British Property Federation said that it was unfair to expect tenants to continue to pay a levy based on “top-of-the-market” 2008 rents. The UK Government argues however that a revaluation would lead to rate increases for many businesses, especially in the south-east.  More on this from Accountancy Age can be found here.

Now to a story that keeps bubbling up to the surface and clearly is not going away.  First it involved government officials such as the head of the Student Loans Company, then it was the BBC now it is teachers.  HMRC has said that supply teachers hired via recruitment agencies using off-shore firms are causing a shortfall in National Insurance contributions.  An HMRC spokesman said: “These kinds of arrangements are not compliant with tax and National Insurance legislation and the end client, or the employment businesses, may be liable for any underpaid tax and National Insurance”.  More on this from the BBC news website can be found here.

Anyone who regularly looks at HMRC press releases will see HMRC increasingly publicising stories such as this.  An Isle of Wight tax advisor who stole £52,000 by claiming tax repayments using his clients’ names was jailed today at Newport Crown Court.  The press release from HMRC can be found here.

Let’s end with matters slightly further afield.  Hong Kong has imposed a 15% emergency tax on foreign buyers of residential property in an attempt to hold back the island’s property bubble. Stamp duty for short-term speculators has also gone up from 15 to 20%.  Similar measures have been imposed by the Singaporean Government.  More on this from the excellent STEP Journal can be found here.

One last point.  Patriotism takes many forms and that includes paying your taxes.

Have a good week.

Where to start?  There is so much happening just now it is difficult to keep up.  It is though a fascinating time to be living in Scotland.

The signing of the Edinburgh Agreement ends the “phoney war”.  So besides this historic agreement what else has been happening?

Let’s start with the publication of the report by the Liberal Democrats Home Rule Commission.   The report can be found here.  There are a number of problems with this report.  The first is the likelihood of the Liberals being part of and having a major influence in a future UK Government.  At best the Liberals will form part of a UK coalition government where they will be a junior partner.  Even if they were to persuade the senior party to implement their plans the Scottish Parliament would not see any new powers until at best 2020.

Then there is the accusation: why should anyone take the Liberal Democrats seriously on tax and fiscal powers?  The Liberal Democrats are in power just now and all we have is “Calman minus”.  They are not even devolving control over the Crown Estate in Scotland and that is party policy.

Then there is the report itself.  The report barely goes beyond Calman.  Inheritance tax is to be devolved and also some parts of capital gains tax.  This report does not even go as far as their last fiscal powers report, the “Steel Commission”.

One last point.  It must be remembered that the Liberals have historically been willing to go further than the other main UK parties on devolving power to Scotland and the Scottish Parliament.  The Steel Commission report provides evidence for this argument.  What their latest report shows is that the Liberals are moving away from devolving serious tax and fiscal powers to the Scottish Parliament.  That is disappointing and makes you wonder.  If this is all the Liberal Democrats are offering what will Labour or the Conservatives come up with?

The answer to that question is likely to be not much.  Johann Lamont has finally announced the membership of her “further devolution commission”.  What is the likelihood of this commission coming up with a proposal close to “devo max” or even “devo plus”?  Almost none.  Why?  Remember the struggle to persuade the Labour party to legislate the Calman proposals.  Think of how few powers are contained in the Scotland Act.  Think of the reaction to senior Labour party members to any call for further tax and fiscal powers to be transferred to the Scottish Parliament. Think of Alistair Darling’s recent comments and in fact of any Labour MP who talks on this subject.  An article from the BBC news website on the Labour party’s commission can be found here.

Then there is the Conservative party.  It is clear that most Conservatives see the European Union debate as the main debate.  Scotland is but a side show.  The idea of a “Constitutional Convention” is laughable.  It simply means, let’s kick this matter into the longest of long grass for another generation.  Ruth Davidson has already got her retaliation in first and stated that corporation tax or welfare powers should not be devolved.  In any case, this convention won’t even see the light of day in any meaningful way until after the referendum.  Does anyone actually believe that the Conservatives will even consider any further powers for the Scottish Parliament if Scotland votes No?

Staying with the Conservatives, Boris Johnson, the Mayor of London, seems to be everywhere these days.  That includes arguing for greater powers for the London Assembly.  Johnson has asked George Osborne, the UK Chancellor of the Exchequer, for London to be allowed to retain any stamp duty raised on property sales.  Johnson argued that London inhabitants face higher tax rates than households elsewhere in the UK, and would use the taxes to fund house building and regeneration schemes.  More on this from the Telegraph can be found here.

The BBC is to offer staff contracts to some of its biggest names in a U-turn after months of accusations that it is enabling tax avoidance.  It is claimed that up to 25,000 people employed at the BBC do not pay tax at source.  More on the U-turn by the BBC can be found here and on the background to this story here.

I was interested to see that the Labour party at its recent conference proposed to reinstate the 50% top rate of income tax and apply a two year suspension of stamp duty on properties worth less than £250,000.  I wonder if they realize that these will be matters for the Scottish Parliament to decide as a result of the Scotland Act by the time the next UK general election takes place.

The UK Government is seemingly intensifying its attack on tax planning by corporations and wealthy individuals.  Extra measures include a 50% expansion of HMRC’s High Net Worth Unit, more resources for the Liechtenstein Disclosure Facility and a new policy of refusing to award government contracts to companies that use “aggressive tax avoidance” schemes.  More on this from HM Treasury can be found here.  When thinking about this it is worth also reading about Starbucks.  Two House of Commons committees are due to question tax officials about how Starbucks has been able to avoid paying tax on £1.2bn of sales since 2009.  More on this from the Guardian can be found here.

Plans put forward to add an additional fee to visitors’ hotel bills have been abandoned by the City of Edinburgh Council in response to objections from business leaders.  The Council planned to reduce its spending on festivals, events and promotional initiatives by setting up a “transient visitor levy”, aimed at raising more than £3m a year.  More on this from the Scotsman can be found here.

The McLaren Formula One team have successfully argued that a £32m fine they paid after a 2007 Ferrari spying controversy should be tax deductible.  McLaren had argued the fine was not a statutory penalty but one incurred under Formula One rules, making the fine a business expense.  HMRC disagreed but a tax tribunal has found in favour of McLaren.  More on this from the Telegraph can be found here.

Now to an old favourite, a Financial Transactions Tax.  European Union Tax Commissioner Algirdas Semeta says he is now sure there are enough Member States to force through an EU wide Financial Transactions Tax. Portugal, Italy, Greece, Spain, Germany, France, Belgium, Austria, Slovenia, Estonia and Slovakia have committed to this new source of new revenue.  A press release from the European Commission on this can be found here.  The UK Government has also confirmed its opposition to a Financial Transactions Tax.  More on the UK Government’s stance can be found here.  This issue provides further evidence of the growing disengagement with the European Union by the UK Government.

Germany’s Roman Catholics are to be denied the right to Holy Communion or religious burial if they stop paying a special church tax.  Can you imagine this happening in Scotland?  An article from the BBC news website on this can be found here.

The French Government is to revise its 2013 Budget proposal to raise the entrepreneurs’ rate of capital gains tax on equities from 19% to 45%.  The retreat follows a campaign against the tax by an organised group of business owners called Les Pigeons (‘The Mugs’ or ‘Suckers’).   An article on this from Reuters can be found here.

Let’s end with a story from America.  It seems that Chinese immigrants are less keen on an American passport.  Citizens of the People’s Republic of China who emigrate to America used to apply for US citizenship as a matter of course, but now America’s  world wide taxation policy is making some of them regret it.  An article on this story from the South China Morning Post can be found here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Now to matters slightly further afield.

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

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

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

Have a good weekend.

HMRC has won what might turn out to be a very significant victory in a case involving Stamp Duty Land Tax planning and in particular sub-sale relief. 

A report on this from STEP on-line Journal can be found here.