Let’s start with Scotland.

According to a new report by the Scottish Government, the tax-take per person is higher in Scotland that the rest of the UK.  Finance Secretary John Swinney says the analysis of tax revenue over three decades proves the country “more than pays its way”.  More on this from the Herald can be found here and the Scottish Government here. 

One of the UK’s foremost ­experts on devolution has warned that new tax-raising powers for the Scottish Parliament have “serious limitations”.  Speaking to Holyrood’s ­finance committee, Gerard Holtham, who chaired a commission in Wales examining the case for more devolved powers for the principality, backed a much wider remit to allow the Scottish Parliament to vary individual bands within the income tax system.

Under the forthcoming Scotland Act powers, Holyrood will take control of a new Scottish rate of income tax, allowing MSPs to reduce or increase the levy as they see fit.  However, they will not be able to change the rates within the system, meaning that any change will apply to lower, middle and higher rates equally.  As I have argued on numerous occasions the Scotland Act 2012 income tax proposal is a mess and does not devolve any meaningful power to the Scottish Parliament.  More on this from the Scotsman can be found here here.

Interesting to see how the First Minister of Wales is following the First Minister of Northern Ireland.  They are both trying to use the Scottish independence referendum as a means to pressure the UK Government into devolving tax and fiscal powers.  More on this from the BBC news website can be found here.

An explanation as to why the First Ministers feel that they have to use this type of argument is shown by the failure of the UK Government to devolve air passenger duty.  Not all of the Calman Commission proposals were implemented by the UK Government.  Air passenger duty was one of the taxes although recommended for devolving was not devolved.  That is why the Scotland Act 2012 is called “Calman minus”.  That is also why we are still hearing calls for air passenger duty to be devolved.  More on this from the BBC news website can be found here.

It also seems that London does not want to be left behind.  Boris Johnson, the Mayor of London, is again calling for new financial powers for London.  The proposals, by the London Financial Commission who were appointed by Johnson, call for London to have the power to raise property and tourism taxes, and various housing and infrastructure spending powers.  More on this from the Guardian can be found here.  No matter the result of the Scottish independence referendum pressure on the UK Government to devolve power away from London, and ironically to London, will continue.  What is particularly interesting is that this does not just mean Scotland but almost every part of the UK.

The UK Chancellor should stop discriminating against visiting foreign musicians and artists by denying them tax breaks which are offered to top foreign footballers and athletes, leaders of Britain’s biggest orchestras have argued.  More on this from the Telegraph can be found here.

Launched in June 2010 by the UK coalition government, the National Insurance “holiday scheme” was aimed at cutting staffing costs for newly-established businesses outside London and the south-east of England.  Eligible firms do not have to pay NI contributions for their first ten employees, with a maximum saving of £5,000 per staff member in their first year.  However, the initiative, which is due to end in September, has failed to live up to its promise and it seems only a few companies have benefited from it. More on this from the Scotsman can be found here.

The House of Commons Public Accounts Committee has claimed that the UK’s largest accountancy firms are using inside knowledge from staff seconded to HM Treasury to help leading companies and wealthy individuals avoid paying UK taxes.  The Public Accounts Committee has also recommended that these companies should be prevented from advising the UK Government on tax law.  In its report on this issue they also claim that these firms have “undue influence over the tax system”.  More on this from the BBC News website can be found here.

A controversial “sweetheart” tax deal between HMRC and Goldman Sachs worth up to £20m, was agreed in part to avoid embarrassment to George Osborne, according to the UK Government’s former head of tax.  Dave Hartnett has said that he decided to settle the long-running dispute after Goldman Sachs threatened to pull out of a prized new tax framework a week after the UK Chancellor had announced that the bank had signed up to it. More on this can be found here.

HMRC raises yield from wealthy taxpayers again.  The top 1% of earners paid 26.5% of the total income tax take in 2012/13, according to figures from HMRC.  More on this from the STEP journal can be found here.

The Scottish Government has published a bill aimed at tackling illegal dumping. The Landfill Tax (Scotland) Bill will transfer responsibility from the UK Government for administering the tax and encourage the proper disposal and recycling of waste.  More on this can be found here.

The Financial Transactions Tax has been in the news again.  The negative reaction from the City of London is as expected.  What is slightly more surprising is how far the UK Government will go to prevent this tax from coming into existence.  The UK Government has launched a legal challenge against plans for a European Financial Transactions Tax.  More on the UK Government’s challenge from the BBC news website can be found here and more generally from the Telegraph here.

Now to an example of European cooperation.  The UK Chancellor of the Exchequer has signed an information exchange agreement with the finance ministers of France, Germany, Italy and Spain in yet another attempt to crack down on tax evasion.  Under the agreement, banks in these countries will be forced to reveal financial details of foreign clients.  More on this can be found here.

Now to matters further afield and a relatively new area for taxation, the internet.  By a vote of 75 to 24, US senators adopted an amendment to a Democratic budget resolution that, by allowing states to “collect taxes on remote sales,” is intended to eventually usher in the first national, i.e. American  internet sales tax.  More on this can be found here and here.

Now to Greece.  The International Monetary Fund has criticised Greece for making very little progress in tackling its notorious tax evasion problem.  It says the rich and self-employed ‘are simply not paying their fair share’ and the tax authorities are still bedevilled by ‘pervasive political interference’.  The IMF also said that Greece is making progress in overcoming deep-seated problems in the midst of a very serious and socially painful recession. More on this can be found here. 

Finally the not unexpected news that Silvio Berlusconi’s four-year conviction for tax fraud on TV rights bought by his Mediaset TV empire has been upheld.  Mr Berlusconi had appealed against a sentence passed by a lower court in 2012, which had found him guilty of tax fraud, but the appeals court reinstated the 2012 conviction and said he should serve four years in jail. More on this can be found here here.

Have a good weekend. 

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.

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.

Not a great week for the UK Government and in particular George Gideon Oliver Osborne.  The problem here for the coalition government is not just the fact that there has been three U-turns in one week, it is the feeling that the March Budget was a bit of a shambles.  I would not go as far as that but it does seem a bit odd to me that so much was made of the so called “pasty” and “caravan” taxes and not that the UK Government did not even consider reducing VAT on repairs and renovations on residential property. 

As suspected the proposed cap on tax relief for charitable donations has been dead in the water for a number of weeks.  All we heard this week was  confirmation of that fact.  One final point on this.  These three U-turns come at a cost of approximately £150m.  Where is that revenue now to come from?   

“Flat rate” taxes were all the rage a few years ago.  Personally I have not been persuaded by the arguments put forward.  That said, as we start to think about how a Scottish tax system might look flat rate taxes should also be considered.  The latest call again came from those generally regarded to be on the political “right”, the TaxPayers’ Alliance and Institute of Directors.  In addition to arguing for a single rate of income tax the usual noises were made for the tax system to be simplified.  No-one is likely to argue against a simpler tax system until specific proposals are made.  For example, recent changes to the amount of personal allowance for those aged over 65.  This change has been termed the “granny tax”.  I did though like the idea of abolishing certain taxes although not necessarily those listed in this report.  It is claimed that the cost of these proposals would be met by prolonging the UK Coalition’s spending cuts by an extra five years.  More on this can be found here.  The report also claims that these changes would increase gross domestic product by 8.4% over 15 years.

Again on tax rates.  According to City A.M. the UK has continued to raise taxes while most other European Union countries tax rates have fallen.  The European Union average top rate of income tax decreased from 44.8 to 38.1% between 2000 and 2012.  In this same period, the UK’s average rose from 40 to 50% although the top rate is to fall from April 2013.  Unless of course we see another U-Turn.  The UK has though followed the European Union wide trend for raising VAT.  The average rate has risen from 19.2 to 21%, with the UK’s up from 17.5 to 20%.  The report from City A.M. can be found here.

Some stories do not surprise you in any way.  This is one of them.  Taxpayers are spending more than £1 million every month on the rent and upkeep of empty fire service control rooms that have never been used.  Details revealed under Freedom of Information legislation show that only one of the nine Fire Control centres is operational, despite the fact that taxpayers will continue to pay for their upkeep for up to 20 years.  This was reported in the Times on 24 May. 

Then there are stories that do surprise you but shouldn’t.  This is one of them and is also a story I have covered recently.  3,000 civil servants are employed by private firms in order to keep their tax bills down.  By remaining off the UK Government’s payroll, thousands of officials are avoiding paying national insurance contributions and are able minimise their overall tax contributions.  The report from HM Treasury can be found here.    

Good news that could have been even better news.  HMRC collected an extra £4.32bn during the last five years.  This is 11 times greater than the investment made for collecting this extra revenue.  However, a House of Commons Public Accounts Committee report claims that another £1.1bn could have been collected without job losses at HMRC.  A report on this from the BBC news website can be found here.

The International Monetary Fund (IMF) and in particular its managing director Christine Lagarde, is rarely out of the news these days.  Lagarde has said said that the UK economy had underperformed and unemployment remained much too high.  The IMF urged the UK Government to consider cutting interest rates and a further round of quantitative easing.  Ms Lagarde also said that UK ministers should prepare a plan for a worse economic environment which could include a cut in VAT.  However, the IMF also said that the UK Government should not divert from its aim of deficit reduction.  A report from the BBC news website can be found here.    

How to win friends and influence people.  Political parties in Greece have criticised Christine Lagarde for suggesting that Greeks were avoiding paying taxes.  Socialist leader Evangelos Venizelos accused Ms Lagarde of “insulting the Greek people”.  A report, again from the BBC news website, on this can be found here. 

There may be trouble ahead.  The UK Supreme Court has ruled that HM Treasury breached European Union law by retrospectively blocking tax refund claims.  The amount involved could be as much as £5bn.  Not surprisingly, HMRC has said that it is “considering the implications of this complex judgement carefully.”   A report on this from City A.M. can be found here. 
 
Now to what some might consider an overreaction.  Some US politicians are so irked at the idea that Americans are renouncing their citizenship to avoid tax, that they are introducing a new Senate bill to tax them forever.  A report on this from ABC news can be found here.  In addition, Congress is close to approving a law under which the Internal Revenue Service will be able to revoke the passports of Americans who owe substantial unpaid taxes.  An article from the Wall Street Journal on the passport claim can be found here. 

I think I will finish with fiscal powers.  HMRC is under no obligation to implement any tax proposal made by the Scottish Government under the Scotland Act.  HMRC can effectively veto any proposal if it differs too greatly from the UK system.  A report on this from the Herald can be found here.  I find it worrying that anyone is at all surprised about this.  I would be even more worried if I thought that anyone actually believes that HMRC and HM Treasury are happy to see tax powers being devolved.  I suspect that there are very few people in HMRC and HM Treasury who are happy to see the beginning of the end for a unified UK tax system.  An earlier blog on this point can be found here.     

Also on fiscal powers.  I still think it is unlikely that the so called “second question” will be asked as part of the independence referendum.  What will those who are arguing for “devo plus” and/or “devo max” do?  Will they vote for independence or the status quo and the hope of something more in the future?  This is an issue I will come back to after my well deserved holiday.  

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.

As with any Budget statement, it is best to take a few days before passing judgement.  That said, and even before all of the detail has been analysed, there are a number of issues that stand out even just 24 hours after the Chancellor sat down.

The first concerns the debate, for “debate” read “leak everything”, that has surrounded a large number of Budget issues over the last few months.  We have a come a long way from the days when Gordon Brown did not even tell Tony Blair what was going to be in the Budget statement.

The proposed reduction in the top rate of income tax has dominated the political news coverage over the last few months.  The debate over how much it has raised will not end with the Budget statement.  There is no doubt it has led to a great deal of tax avoidance, aggressive tax avoidance.  That was to be expected.

The changes to the personal allowance and tax rate thresholds, has already begun to dominate the news coverage.  The coalition government must be hoping that the news coverage concentrates on the increase in the personal allowance and not the 300,000 more people who will be drawn into the 40% income tax rate from 2013/14.  To put this in context.  In the 1980’s approximately 5% of people were higher rate taxpayers.  Now it is 15%.

The freezing of age related allowances is also likely to cause problems for the coalition government.  Somehow they need to show that this is a good example of tax simplification.

The claim that does stand out is that by reducing the top rate of income tax, combined with other avoidance measures, five times more tax will be raised from the richest.  The Institute of Fiscal Studies noted today that that this is the third worst Budget statement for measures relating to tax avoidance.  This is measured on how much tax the avoidance measures to be introduced are likely to save.

Now to an old Budget favourite, stamp duty and Stamp Duty Land Tax (SDLT).  The SDLT changes were not unexpected especially for anyone who buys a Sunday newspaper.  The Chancellor announced that the level of stamp duty on residential properties over £2m which were bought via a company would increase to 15% with immediate effect.  In addition, overseas companies that already own UK residential property worth more than £2m will be subject to capital gains tax (CGT) from April 2013.  The CGT point was less expected but nonetheless welcome.  This though should have been dealt with many years ago.  The Chancellor also made it very clear if avoidance of this kind continues, further measures would be introduced without warning which have retrospective effect.

That though is not the main issue with SDLT in Scotland.  In Scotland only around 10 properties a year are sold that are worth over £2m.  The jump from 1% to 3% of SDLT at £250,001 is a much bigger issue.  Hopefully that will be one of the first issues dealt with when this tax is finally under the control of the Scottish Parliament.

One change I was hoping to see, in vain I might add, was a targeted VAT reduction for home repairs and renovations.    

Now to the fiscal powers debate.

The UK and Scottish Governments have agreed a number of changes to the Scotland Bill.  Both Governments will now recommend that their respective Parliaments support the Bill.  A number of minor changes have been agreed.  The Scottish Government has secured changes to the sections of the Bill dealing with borrowing powers and the Supreme Court.  It was also agreed that the measures contained in the Scotland Bill would only be implemented with the agreement of the Scottish Parliament.

The proposed reservations of insolvency procedures and regulation of health professions will also be removed preserving the Scottish Parliament’s existing legislative competence for these areas.  More on this can be found on the Scottish Government’s website which can be found here.  The list of proposed amendments agreed by both the present, and previous, Scottish Parliament Scotland Bill committees is also listed.  These lists show how few changes have been made to this Bill.  A report from the BBC news website on this matter can be found here.

The House of Commons Scottish Affairs Committee has said that the Crown Estate’s control of 50% of Scotland’s coast and almost all the seabed should be devolved to Scotland’s local authorities.  The Scottish Affairs Committee said management of the marine environment lacked transparency and public consultation.  It is now difficult to find someone who is opposed to devolving this power.  Does that mean the Scotland Bill will be further amended to include this power?  I suspect not.  More on this can be found on a report on the BBC news website which can be found here.

I was intrigued to see the Secretary State for Scotland, Michael Moore, asking for tax clarity from the Scottish Government and in relation to the independence referendum.  There is a simple answer to this question, and which would provide a degree of certainty for individuals and businesses alike.  There should be no major changes for two or even three years to the tax legislation, and system of administration, that the Scottish Government inherits in the event of a “yes” vote.

I was not surprised to read that the Scottish Government is struggling to persuade HM Treasury that the new Scottish police and fire services should be exempt from VAT.  This is likely to mean an annual VAT cost of between £22 and £36m.  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.  A report on this from the BBC news website can be found here.  My earlier blog on this can also be found here.

The new definition of a charity will apply to all UK charity tax reliefs from April 2012.  More information on this can be found here.  I still find it odd that when it seems that everyone is talking about tax simplification, that bodies wishing to become a charity have to meet various conditions set by OSCR (Office of the Scottish Charity Regulator) and then by HMRC.  The reason for this is that the definition of a charity in Scotland is different from that used in England and Wales.  HMRC apply English and Welsh law.  This means if Scottish charities wish to claim the various UK charity tax reliefs then they also have to submit an application to HMRC.  What utter nonsense.  If the UK Government were serious about tax simplification, the fact that you are registered as a Scottish charity should be enough to allow a charity to claim the various UK tax reliefs.  The same issue applies in Northern Ireland as it now has its own charity regulator.

I was interested to see that the European Parliament has finally voted to approve the cross border inheritance law proposed by the European Commission to clarify which jurisdiction’s succession law should govern an international estate. The UK and Ireland remain opted out of the regulation.  A report on this from the BBC news website can be found here.

François Hollande, the Socialist candidate for the French presidency, has provided more detail of his plan for a 75% top rate of income tax.  He now says there will be a ceiling on the total tax paid by an individual in one year; and that the rate will be only temporary until the public sector budget is balanced.

Finally to Greece and some encouraging news.  The head of the European Union’s Greek task force, Horst Reichenbach, has reported the collection of almost €1bn (£830m) in back taxes.  Almost double the target figure.  A good start but still a fraction of the amount outstanding as they believe there is around €8bn in uncollected tax revenues.  More on this from a report on the BBC news website can be found here.

Have a good weekend.