I was asked this week to comment on some of the initial tax related issues that the Scottish Parliament might have to consider if Scotland votes ‘YES’.

The first comment I made was that the Scottish Parliament should pretty much enact the UK tax system on independence.  The Scottish Parliament should then take its time in deciding what to keep and what to change.  That said, there are a number of matters it might have to look at early on.

Let’s start with VAT.  Only if Scotland becomes independent will it have control, or at least as much control as is possible, of VAT.  The Scottish Parliament could reduce the VAT rate on home repairs and renovations to 5%.  Something our building industry has long been arguing for.  The Scottish Parliament could also ensure that Police and Fire & Rescue Scotland can recover their VAT costs.  This is something the UK Treasury has so far resisted.

The Scottish Parliament could look again at what constitutes a charity in Scotland and with that which entities should receive the associated tax and other benefits.  “Private” or “independent” schools for example.  This is an issue that should not just be left to OSCR, the body that regulates charities in Scotland.

Then there is the debate surrounding a European Union “financial transaction tax”.  An independent Scotland will have to consider its position on this.  If a number of European countries decide to go ahead with this then the Scottish Parliament will have to decide if it wants to join them.  One option could be to agree to a FTT and at the same time abolish stamp duty on shares.

Now to environmental taxes.  The Scottish Parliament might want to consider introducing a carbon tax.  The debate in Australia shows how difficult this might be.   Independence does though mean tough decisions.

Then there is local taxation.  I am sure “Land Value Tax” supporters will be pressing their case even more strongly if Scotland votes ‘YES’.

Now to administration.  Lots of opportunities here for simplifying things. There is no need for Scotland to have a separate Companies House, Stamp Office and Registers of Scotland.  “One stop shops” for the services provided by these bodies is a minimum of what we could do.  We could even create “tax and benefits” centres throughout the country that are based in our local authority buildings.

Then there is “tax avoidance” and “tax evasion”.  The Scottish Parliament could consider publishing at least a summary of each tax return or legislate for published beneficial ownership registers.

Just a few thoughts.

Where to start with so much happening in “tax land” just now.

Let’s start with the increasing interest by the UK and other governments in offshore tax havens and in particular the creation of “beneficial ownership registers”.  The issue here is that it is often very difficult to find out who the actual owner of an asset is.  The “legal owner”, the name stated on a land register or a share register, may be different to the so-called beneficial owner, the person who actually benefits from the asset in question.  This distinction can also be of use when trying to avoid tax and in particular hiding ownership and/or benefit from a particular tax authority.

This issue was on the agenda at the recent G8 summit in Northern Ireland.  Partial agreement was reached but it is not clear if trusts as well as companies will be included, which countries will actually set up these registers, who will have access to these registers and how long this is going to take.  More on the “Loch Erne Declaration” from the BBC news website can be found here.

There is no shortage of ideas surrounding tax these days. For example, Justin King, the chief executive of Sainsbury’s, has called on the UK Government to follow the US by introducing a “marketplace fairness tax” for online retailers and predicted that the need to revamp the corporate tax system will be a battleground at the next election.  More on this from the Telegraph can be found here.

Google only seems to be in the news these days when its tax affairs are being discussed.  The House of Common’s Public Accounts Committee has called on HMRC to fully investigate Google’s tax arrangements in a report critical of the company’s corporation tax avoidance. More on this from the Scotsman can be found here.

Ed Miliband and George Osborne have traded charges of hypocrisy over party funding as it emerged that Labour had received a donation of shares from TV shopping channel magnate John Mills. Mr Mills admitted he had given the party shares rather than cash because it was “tax efficient”. Labour suggested the Chancellor’s involvement in the matter was hypocritical, given the Tories’ own efforts to seek donations that avoided tax. More on this from the Guardian can be found here.

Now to the ever increasing range of Scottish taxes, charges and duties.  Scotland is to follow the Republic of Ireland, Wales and and Northern Ireland in introducing a charge on plastic bags.  The charge is to be 5p and the funds are to go to good causes.  Regulations will be introduced in the Scottish Parliament in time for businesses to start charging by October 2014. The information released so far seems sensible and well thought out and in particular the effort to reduce any burden on small businesses is to be welcomed.  More on this can be found here.                                                                                 

More than half-a-million Scots are in danger of being worse off when the Scottish Parliament gains new powers over income tax because the current system would not allow them to claim tax relief on their private ­pensions.  More on this from the Scotsman can be found here.  This simply confirms how ill thought out the Scotland Act’s income tax proposal is.  Dividing control of a tax between two legislatures is rarely sensible or workable.

Now to the Scottish Conservatives and their never ending debate on further powers for the Scottish Parliament.  Coverage of their recent conference was dominated by the differences of opinion on this issue within the Scottish Conservative party.  More on this can be found from the Scotsman here and the Telegraph here.

The Scottish Green party is urging the Scottish Government to be bolder on land reform and to look at measures including land value tax.  I agree that this is something that needs to be looked at.  More on this can be found here.

When I read stories such as this I know that tax simplification is never going to happen.  David Cameron has said that married couples are to be given a tax break in the near future.  The tax break will be worth up to £150.  The income tax legislation is already complicated enough and, given the state of HMRC just now, I can guess its  private reaction to ideas such as this.  More on this from the Telegraph can be found here.

I wonder what the rest of Scotland thinks of this suggestion.  If Edinburgh’s £776m tram system is to have any chance of making even a small profit over the next fifteen years a tax concession will be required.  It is claimed that a large part of somehthing called the “sinking-fund” might be tax deductible but the City of Edinburgh Council has confirmed that it has not yet made approaches to HMRC to confirm that this is indeed the case.  More on this can be found in the Times of 27 June.

Now to matters slightly further afield.  The European Commission has published its plans to require EU member states to automatically exchange information about all forms of taxpayers’ income including dividends and capital gains, as well as the bank balances of all EU residents.  This is further evidence of the increasing role the EU is playing, and intends to play, in tax and financial matters.  More on this can be found here.

In addition, Italy, Belgium, Greece, Poland and Finland’s Aland Islands have failed to implement the European administrative co-operation directive, which requires member states to automatically exchange information on their residents’ taxable income. The implementation deadline expired six months ago, and the European Commission says it will take the countries to the European Court of Justice if they persist in ignoring the directive, which is soon to be extended to cover other types of income.   More on this from Reuters can be found here.

Taxpayers have brought litigation against the Canada Revenue Agency’s use of its general anti-avoidance rule (GAAR) on 52 occasions since it was introduced, and won exactly half of them, according to new CRA figures. Three-quarters of the litigated cases turned on whether there was misuse or abuse of the GAAR or another statute.  More on this can be found here.  This is of particular interest given that we will soon have a UK GAAR.

Now to the USA and back to the “beneficial ownership” issue.  The US President’s office has promised to introduce comprehensive legislation requiring the disclosure of beneficial ownership information, which currently does not exist in the US either at state or federal level. The promise is part of an action plan issued after last week’s G8 summit.   More on this from STEP can be found here.

The US Supreme Court has held that the surviving spouse of a same-sex marriage must be granted the spousal estate tax exemption, despite provisions of the Federal “Defense of Marriage Act” restricting federal benefits to traditional mixed-sex couples.  More on this from STEP can be found here.

Lastly to Cyprus.  An expert commission appointed by Cyprus’s central bank has concluded that its financial centre can only survive if it is reformed to be less dependent on tax breaks for clients in particular countries, with strictly and visibly enforced anti-money laundering controls, and able to offer an international standard of wealth management services.  More on this from STEP can be found here.