Let’s start with the latest UK coalition Government spat.  This time on Nick Clegg’s call for a “wealth tax”.  An article on this from the Herald can be found here.

The Deputy Prime Minister said: “If we are going to ask people for more sacrifices over a longer period of time, a longer period of belt tightening as a country, then we just have to make sure that people see it is being done as fairly and as progressively as possible.”  George Osborne’s response was as expected and criticised Nick Clegg’s proposal claiming that a wealth tax would drive away Britain’s wealth creators.    

There has been lots of commentary on this.  My favourite piece was by Iain MacWhirter in the Herald.  This article can be found here.  The following is from his article:

“It is astonishing that anyone still subscribes to the myth that the enrichment of the few leads to the prosperity of the many.  It just doesn’t happen.  Wealth does not “trickle down” to the rest of society from the troughs of the very rich – if anything the reverse is the case.  It is sucked up through the concentrations of asset wealth held by the top 1% in property, shares and bonds. The story of the last three decades is that the wealthy have become immensely, shockingly, incomprehensibly richer while the middle has been squeezed and the poor remain pretty much as they always have – at the bottom of the heap struggling to hold their lives together.”

The UK Government is reportedly considering creating a scheme of “mini-jobs” which would allow employees to take on work without paying tax or national insurance, in a bid to boost employment.  The scheme is modelled on a German programme under which employees can earn up to €400 a month before any tax is paid.  An article on this from the Guardian can be found here.

Now to an old favourite, MPs’ expenses.  HMRC is reportedly in a dispute with the Westminster’s expenses watchdog, the Independent Parliamentary Standards Authority, with the latter defending the right of MPs to employ accountants to fill in their expenses forms and tax returns and insisting that the cost should be tax deductible.  An article from the Guardian on this can be found here.  The article quotes some of the correspondence between the parties which makes interesting reading and suggests that MPs, or at least IPSA, has a short memory.  Taxpayers are not generally permitted a tax deduction for the costs of complying with tax law.

UK public sector borrowing reached £600m last month, leading to further criticism of the UK Government’s economic strategy.  Borrowing in the first four months of the year was £9.3bn higher than the equivalent period last year whilst there was a 20% drop in the corporation tax take, according to official figures.  An article from the Scotsman on this issue can be found here.  This is an issue which is not going away anytime soon.

“The war on the motorist is a myth and fuel taxes should be raised without delay”.  A report by the Institute of Public Policy Research, a think tank, has recommended that fuel taxes be raised and congestion charging extended.  An article on this challenging proposal from the Telegraph can be found here. 

The Scottish Daily Express claims that Scotland’s local authorities are set to write off more than £320m of unpaid poll tax.  For a more balanced view of what is actually happening read the article all the way through.  The article can be found here.

The UK Public Accounts Committee has urged HMRC to prosecute more people for alcohol smuggling.  HMRC estimate that £1.2bn in tax is left uncollected each year on smuggled beer and spirits, yet there have been no more than six successful prosecutions each year, in the four years to 2009-10.  An article on this from the BBC news website can be found here. Another argument for devolving control over alcohol duty to the Scottish Parliament? 

Some Italian tax inspectors are disguising themselves as holidaymakers to detect tax evaders on the crowded beaches, while others are questioning the owners of luxury yachts.  Great work if you can find it.  An article on this from the Telegraph can be found here. 

Riots erupted on the tranquil Greek island of Hydra after tax inspectors arrived in force to arrest shopkeepers for not issuing receipts.  Angry crowds stoned the inspectors and besieged the building in which they took refuge until riot police arrived to restore order.  An article on this from the Athens News can be found here. 

Now to the USA.  The US media continues to analyse the tax-planning methods used by Republican presidential candidate Mitt Romney.  More on this from the STEP Journal can be found here.    

Have a good weekend.

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

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

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

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

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

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

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

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

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

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

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

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

Have a good week.

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.