tax revenue

The truth about the annual GERS figures. Open Minds on Independence #6

Stephen Richard — Thu, 23 Sep 2021 08:16:04 +0000

The truth about the annual GERS figures. Open Minds on Independence #6

Primary Author or Creator

The National

Stephen Richard Thu, 09/23/2021 - 09:16

Additional Author(s) / Creators

Believe in Scotland

Date Published

Tue, 03/02/2021 - 12:00

Category

Economy

Type of Resource

News Media

Fast Facts

There is no set of official accounts that tells us how an independent Scotland’s economy would fare, nor what its finances would look like. Any attempt to analyse Scotland’s finances is instantly hampered by the fact that Scotland is not an independent nation and therefore does not have the same financial data, trade statistics, costs and revenue information available to work with that a normal independent country would have.

Resource Address (URL)

https://www.thenational.scot/news/19130594.open-minds-6-truth-gers---scotlands-…

Keywords

Language English

Taxing an independent Scotland

Stephen Richard — Mon, 13 Sep 2021 08:09:50 +0000

Taxing an independent Scotland

Primary Author or Creator

Stuart Adam

Stephen Richard Mon, 09/13/2021 - 09:09

Additional Author(s) / Creators

Paul Johnson, Barra Roantree, Oxford Review of Economic Policy

Alternative Published Date

2014

Category

Taxation

Type of Resource

Assessment report

Fast Facts

If Scotland were to become independent it would gain considerably more control over its tax system than it currently enjoys. This paper considers the consequences of independence for the optimal design of a new Scottish tax system, an analysis which would also be of some relevance for considering the consequences for tax design of independence of other smaller nations.

Scotland is different from the rest of the UK in some ways that are important for tax system design. Incomes are more equally distributed, for example. That is one reason why the progressive income tax currently raises less per head in Scotland than in the rest of the UK. It also suggests that there is less to be gained in terms of redistribution from sharply progressive taxation.

Independence would create additional complexity for individuals and firms working or trading across borders. It could also put downward pressure on tax rates and our analysis suggests that optimal tax rates in an independent Scotland are likely to be lower than optimal rates in the UK as a whole. At the same time, the context of a substantial budget deficit will continue to put upward pressure on tax rates.

More details

Possible consequences of Scottish independence for tax design.

Currently, onshore revenues per head in Scotland are very similar to those in the UK as a whole. The biggest differences relate to one of the important economic differences between Scotland and RUK—the relatively more equal distribution of income and wealth. This results in receipts for income tax and various capital taxes being lower in Scotland than in RUK. It also implies that, all else equal, the benefits from high and strongly progressive tax rates are less in Scotland than in RUK.

Of course the biggest difference between total tax receipts in Scotland and RUK is the very much greater importance of oil and gas revenues in Scotland. While the fact of independence would not obviously change the optimal structure of oil and gas taxation, it would matter a lot for the role of oil and gas revenues in the public finances. Total receipts in Scotland would have been very much more volatile than in the UK as a whole over recent decades because of the volatility of oil and gas revenues and their greater importance in a smaller economy. Going forward it is clear that an independent Scotland could not plan its public finances by treating oil and gas revenues as certain. While we do not consider it in this paper, the combination of higher spending per head in Scotland with similar onshore revenues, uncertainty about offshore revenues and, shared with RUK, more fiscal consolidation required in the short term, means that the pressure for taxes to rise following independence would be considerable.

Of more general application is our analysis of the possible effects of independence on optimal tax policy. The key new challenge is mobility of tax bases given the likely openness of the Scottish economy vis-à-vis RUK. If most of the major tax bases—people and personal income, goods and services, capital and profits—are mobile between Scotland and RUK (as well as wherever else they might already be mobile), then taxes on all of those would be harder to raise. This will create pressure to move towards more reliance on less mobile tax bases (notably property) and less reliance on the most mobile tax bases (notably corporate profits), and in the absence of cooperation in tax rate setting between Scotland and RUK, the optimal long-run level of taxation is likely to be lower than in a unified UK.

The same will also apply to RUK, which will (to a lesser extent) be a more open economy by virtue of having an independent Scotland next door. Tax competition between the two countries (as well as the existing competition vis-à-vis third countries) might lead them to raise less revenue between them than would be best for them collectively. There would therefore be a premium on cooperation and coordination to minimize potentially inefficient tax competition—as well as to minimize compliance costs for firms that trade (or hire etc.) across the border. Such concerns should not be overstated. The Scotland–RUK border is not densely populated and there are many reasons that people would not move between the two countries in a frictionless way to live, work, or shop. But it is a factor that an independent Scottish government would need to take into account.

One focus for an independent Scotland should be to look at how tax policy is made. Setting up institutions in such a way as to facilitate a tax strategy to be coherently formulated and implemented and to promote high-quality debate and scrutiny would increase the chances of good policies being implemented and poor ones being reversed (or, better still, not being introduced in the first place). This should also help to bring about a more stable tax system over the longer term, which in itself would help enable individuals and firms to plan and boost prosperity.

Resource Address (URL)

https://academic.oup.com/oxrep/article/30/2/325/521370

Keywords

Taxation

tax revenue

Language English

Policies for an independent Scotland? Putting the Independence White Paper in its fiscal context

Stephen Richard — Mon, 13 Sep 2021 08:00:53 +0000

Policies for an independent Scotland? Putting the Independence White Paper in its fiscal context

Primary Author or Creator

David Phillips

Stephen Richard Mon, 09/13/2021 - 09:00

Additional Author(s) / Creators

Gemma Tetlow, Institute for Fiscal Studies

Alternative Published Date

2014

Category

Taxation

Type of Resource

Assessment report

Fast Facts

A conservative anslysis of prospects for taxation in an independent Scotland.

More details

Independence would give the Scottish government additional powers over taxation and areas of spending that are currently the preserve of the UK government. This would give Scotland greater freedom to design a system of taxes that meets its needs and aspirations and, if it were willing, correct some of the failings of the existing UK system. It would also allow Scotland to redesign public services and welfare provision and to change the areas it prioritises for public spending. Scotland would also have more choices about whether it wanted to be a lower-tax, lower-public-spending country or a higher-tax, higher-public spending country. But it would still face the same need to ensure its tax and spending policies were consistent with a sustainable fiscal position.

Resource Address (URL)

https://ifs.org.uk/uploads/publications/bns/bn149.pdf

Keywords

Language English

Fighting for Tax Jobs, Fighting For Justice: A Workers’ Alternative

Stephen Richard — Mon, 06 Sep 2021 21:29:04 +0000

Fighting for Tax Jobs, Fighting For Justice: A Workers’ Alternative

Primary Author or Creator

Craig Dalzell

Stephen Richard Mon, 09/06/2021 - 22:29

Additional Author(s) / Creators

Ben Wray, Common Weal

Date Published

Sat, 06/30/2018 - 12:00

Category

Economy

Taxation

Type of Resource

consultation response

Fast Facts

Commissioned by PCS, this joint work examines the economic impact of HMRC’s plans to close departments around Scotland and establish two regional offices in Glasgow and Edinburgh.

It is found that over 2,300 jobs could be lost due to these changes with an overall negative impact on GDP of £89 million.

The economic impact will be particularly magnified in local areas where the current HMRC departmental office employs a substantial proportion of the local workforce

More details

― The UK Government’s modelling for the impact of cuts on the broader economy is outdated. We use the IMF?s revised estimates for the fiscal multiplier, which take greater account of data after the Great Recession. Using these findings, we show that any ?efficiency savings? from cuts will eventually be wiped out by the resulting contraction in tax revenue.

― However, the reality could be far more damaging if HMRC cuts make the campaign against tax avoidance and evasion less efficient. If so, HMRC cuts will mean a reduction in tax revenue for all public services. They will also damage the drive to reduce the social inequality and injustice caused by failure to enforce the tax system

― Current HMRC plans foresee a leaner service that does more with less thanks to centralised digital technology systems. Our research suggests that the practicalities of this model have not been thought out, particularly in areas like customs and excise which will be inundated with new problems after Brexit.

― According to widespread reports, existing cuts have already had a “chaotic” and “shocking” impact on HMRC administration, suggesting that a more cautious estimate of administrative change is needed. The current plans are, by contrast, radically optimistic in assessing the impact of replacing human services with technology.

― International evidence suggests that Britain’s model is inefficient and will not work. Where digital technology has been a success, it has been married to increases in staff numbers, not decreases.

― These decisions have been made by the UK Government with little consultation with the Scottish Government over the likely impact. This raises constitutional questions about democratic accountability.

― The cuts will exacerbate uneven development, both across the UK and within Scotland. Edinburgh, which already gets a significant subsidy from jobs created by public sector administration, will get a further boost under the plans. By contrast, businesses and communities in poorer areas like West Lothian, Cumbernauld and East Kilbride will suffer from centralisation.

― The plans risk a breakdown in trust and authority between central Government and Scotland’s communities.

― The plans make heroic assumptions about Scotland’s vast geography. They underestimate commuting times (and stresses on both individual and existing transport systems) in Greater Glasgow. They also take insufficient account of the waste and cost of sending mobile teams from Edinburgh or Glasgow to crucial economic areas like Aberdeen and Inverness.

― The Scottish Government has its own semi-independent taxation system, Revenue Scotland. However, HMRC’s Building Our Future proposals would violate many of the principles advocated by the Scottish Government as basic norms for a just tax administration. Moreover, and perhaps most significantly in the current political climate, we expect the proposed changes to interfere with the collection of the Scottish Rate of Income Tax, with consequences for funding public services in Scotland.

Resource Address (URL)

https://commonweal.scot/wp-content/uploads/2017/06/Fighting-for-Tax-Jobs.pdf

Keywords

Language English