More debate on the top rate of income tax.  John Mason, former MP and now SNP MSP, suggested that the top rate of income tax is increased when the power to vary income tax rates is passed to the Scottish Parliament.  This proposal was given short shrift by the First Minister.   Eric Pickles, UK Community Secretary, wants to slash the top rate of income tax and thinks that imposing a “mansion tax” would be a mistake.

The UK Government’s deal with the Swiss banks got a mixed reaction.  The Swiss government has agreed to tax money held by UK taxpayers in Swiss bank accounts for the first time, while still hiding their identity.  The mixed reaction is because the amount of tax likely to be paid will be just a fraction of what is actually owed.

The campaign to reduce the rate of VAT on domestic property repairs and improvements has continued.  One point that as yet has not received much coverage is the fact that the Isle of Man has already negotiated such a reduced rate with HM Treasury.  More on this can be found here.

The fact that the French and German governments are pressing for a unified rate of corporation tax for the Euro zone countries has received a fair bit of coverage particularly in Ireland.  I suspect the fact that the same governments are also again, and with a fair bit of urgency, pressing for a European “financial transaction tax” will receive increased coverage.  This is also known as the “tobin tax”.

There has been an increasing number of stories on the action HMRC is taking on VAT and other forms of tax fraud.  This makes sense given the cutting of HMRC’s budget.

Another example of how much work, and how effective, HMRC can be when targeting specific groups.

Five plumbers have been arrested and around 600 are under civil investigation by HMRC for failing to pay the right amount of tax.

More information can be found here.

Glad to see ICAS contributing to the fiscal powers debate.   This follows on from PWC last week.

I have not yet had a chance to read what they have said in any great detail but have outlined some general thoughts below.

1. How can the power to vary a rate of tax be looked at in isolation?

The comments by ICAS concern devolving the right to vary the rate of corporation tax to the Scottish Parliament.  The background to this is that the Northern Ireland Assembly is likely to be given the right to vary the rate at which corporation tax is charged on companies located in the Province.

What is the point of just devolving the right to vary the rate or rates at which corporation tax is charged without devolving underlying or connection legislation?  What about the rest of the corporation tax legislation?  What about company legislation?  The tax rate is only one issue for companies.  What about tax reliefs?  What about company administration?  If this is a serious debate about giving the Scottish Parliament increased fiscal levers why are these points not being discussed?

Secondly.  If we are serious in the need for increasing the number of economic levers the Scottish Parliament has at its proposal what about stamp duty and stamp duty reserve tax?  Taxes do not apply in isolation.  It is rare to only have to consider one tax when advising a business.  As these taxes are being charged on share dealings these should be looked at along with corporation tax.

Also business does not just consider the headline rate of tax when deciding  where to locate.  Many others factors are looked at and not just tax.

My second point about “connected taxes” applies equally to property matters.  In that case stamp duty land tax and capital gains tax.

Also I still find it odd that we are discussing income tax in the context of the Scotland Bill and corporation tax due to what is happening in Northern Ireland.  A more sensible approach would have been to look at areas already devolved to the Scottish Parliament and match up the taxes that apply to these powers.  For example.  Inheritance tax as succession law is already devolved.  Or the environmental taxes as the environment is a devolved responsibility.  Tobacco and alcohol duties as health is devolved or the various car taxes as transport is devolved.   That would give the Scottish Parliament a series number of economic levers and also the chance to learn what to do with them.

2. Institutions.  Scotland is soon to have its own tax system.  That is true even under the Scotland Bill proposals.  The Scottish Parliament although not having control over a complete range of taxes will have control over a number of taxes and have some form of borrowing powers.   The Scottish Government’s Finance Department needs to become an Exchequer, i.e. a body that deals with matters presently the preserve HMRC and HM Treasury.  Why is this issue not being debated?

Again on institutions.  Scotland is a relatively small country.  Much smaller than the rest of the UK.  Do we need our own separate HMRC and HM Treasury?  Why not combine them?  In simple terms HMRC is simply there to administer and collect our taxes.   Does Scotland need its own Companies  House, Registers of Scotland or Stamp Office?  Of course not.  One tax, law and registration body could deal with these and many other functions.   Again why is this issue not being debated?

3.  I was intrigued by the following comment by Elspeth Orcharton, assistant director of tax at ICAS: “Devolving tax powers is contrary to the goal of simplifying tax legislation and stability at a UK level, and you could question whether such a move would make the UK as a whole less competitive on the international stage.”

That sounds as if the starting point for ICAS is what is good for the UK not Scotland.  Also is ICAS saying that no powers should be devolved ever?   I suspect not.

Devolving taxes may actually simplify the present system.  For example when SDLT is devolved there will be no need for the present guidance and forms to explain the differences in Scotland and England due to our different systems of property law.   Also whenever I have discussed the devolving of SDLT one issue has almost certainly been raised.  How can we simplify it.

The last point of the above comment is also also telling.  I, for example, look at this issue from the viewpoint of how can I make Scotland more competitive.  I suspect that many views on devolving fiscal powers may be decided simply by where that person’s starting point is: Edinburgh, Cardiff or Belfast or London.

I am also not sure what is meant “stability”.   I suspect it may be a reference to tax competition.   If it is then that horse has left the stable.  Once taxes are devolved tax competition will soon become the norm.  I for one do not see that as a bad thing.

The term ” tax simplification” in a UK context does also make me smile.   Why is devolving taxes contrary to the principle of tax simplification?  If we in Scotland do not think we can improve on what we have presently then what is the point in having this debate.

What people forget is that the UK does not have a unitary legal system.  Although the tax system applies English law there is on occasion conflict with connected legislation.  For example the introduction of SDLT in Scotland is generally regarded as being a shambles.  HMRC did not take into account Scottish property law.  The conflict there was tax law based on English legal principles and Scottish property law.

Anyway, just a few thoughts on a quiet Sunday afternoon.

More on this from the Scotsman can be found here.

HMRC publish latest list of sports clubs qualifying for Community Amateur  Sports Club status.   Good to see an increasing number of Scottish clubs listed.

The list can be found here.

More information on CASC status can be found here.

A reminder that businesses, regardless of turnover, who registered for VAT on or after 1 April 2010 must submit their returns online and pay any VAT due electronically.

This will apply to all VAT- registered businesses by April 2012.

More information can be found here.

HMRC has updated its guidance on “Payments to overseas bodies”.   The guidance outlines what constitutes “charitable expenditure” and gives a number of useful examples. 

The updated guidance can be found here.

Excellent report by the House of Commons Treasury Select Committee on HMRC’s standards of service.

The findings will not be a surprise to those who have had to deal with HMRC over the last few years.   Just trying to contact HMRC, or to get someone from HMRC to respond to correspondence, is a challenge in itself.

A statement form the Select Committee and its report can be found here.

Fascinating article in The Sunday Times today.

The article claims that laying off public-sector staff cost at least £1bn last year.

Two examples:

In the last two years 37 HMRC officials have left with packages worth more than £200,000.

At the Land Registry, English and Welsh equivalent of the Registers of Scotland, more that 200 officials received packages worth over £100,000.  68 of these were worth over £200,000.

The £447,382 pay out for Bernadette Kenny, the HMRC official in charge of personal taxes when HMRC miscalculated the tax due by 6 million people, will I am sure receive a lot of publicity in the next few days.

Interesting report on HM Revenue & Customs by the National Audit Office.

HMRC has to reduce its running costs by £1.6 billion in the next four years.  That is a real challenge when you consider that it also has to increase tax revenues, improve customer service and achieve reductions in welfare payments.

This is likely to mean cutting staff numbers by a further 10,000 and reducing its number of offices still further.

In its report the NAO said HMRC had reported savings of about £1.4bn since 2005.

The NAO report can be found here.

A report on this by the BBC can be found here.

HM Revenue & Customs has published fresh proposals to clamp down on dishonest tax agents.

The discussion document proposes compulsory access to the working papers of dishonest tax agents, even those in the possession of a third party, but only if sanctioned by the First Tier Tax Tribunal.  Civil penalties will also be available if there has been an illegitimate loss of tax.

The discussion document can be found here.