Taxation

Taxation and welfare payment

Stephen Richard — Thu, 28 Oct 2021 14:51:24 +0000

Taxation and welfare payment Stephen Richard Thu, 10/28/2021 - 15:51

Author or Creator

Common Weal

How do we make sure that we can collect tax and pay social security benefits?

What do we need to do to be able to collect taxes after independence?

Scotland already has a body called Revenue Scotland which has the basic tax details for everyone resident in Scotland. It only collects a small proportion of taxes at the moment but extending it to collect all taxes is primarily a matter of staffing and strengthening IT systems so is comparatively routine. What is a little more complicated is collecting business taxes as these are currently largely the responsibility of the UK (though businesses with premises in Scotland will be registered for non-domestic rates). Data on companies operating in Scotland would be transferred from the UK to Scotland during negotiations and any gaps would need to be worked on during transition.

And paying social security benefits?

It's much the same issue. Scotland has the skeleton of a social security system but during the transition it would need to build up its systems and have the UK's data and responsibilities transferred to it.

What about pensions?

This is often raised as a major issue for independence but the reasons for this are political rather than technical. The UK has a revenue system of pensions rather than a contributory one so we'll be paying the same pension to the same people in the same way as in the UK. There is nothing much to disentangle.

What about people who have paid towards the UK pension their whole life?

This is a hotly-contested grey area. The current rules say that anyone who has contributed enough in National Insurance Contributions that they are eligible for a full UK pension will be paid that pension irrespective of where they are located on retirement – the UK pays the pensions of people who have retired to other countries and there is no obvious exemption which means that they wouldn't pay Scottish citizen's pensions. However, in all likelihood this is a matter that would be resolved during transition negotiations and Scotland might negotiate to have UK liabilities offset against Scotland's debt share. Either way, Scotland would be able to pay pensions as the UK does now.

So tax and social security would be exactly the same after independence?

This is one of the areas which is tricky to deal with politically. The UK tax system is unsupportably complex and its social security system aggressive and unpleasant. Enshrining these for day one of independence is very hard to justify, but any changes (even just simplification or 'cleaning up') imply political decisions. A solution might be a cross-party summit after a vote for independence to negotiate an interim solution. After that tax and social security policy will be a matter for elected governments.

Keywords

Taxation

Pensions

Welfare benefits

The Accounting Trick that Hides Scotland’s Wealth

Stephen Richard — Fri, 15 Oct 2021 22:10:54 +0000

The Accounting Trick that Hides Scotland’s Wealth Stephen Richard Fri, 10/15/2021 - 23:10

Author or Creator

Business for Scotland

It is common to see the report used as evidence of the size of deficit that would befall an independent Scotland but this would only be the case if one imagines public finances being set up exactly as they are within the rest of the UK. An independent Scotland would almost certainly look to control tax, spending and borrowing powers differently than the current set up, and that makes it more difficult to predict what the country’s finances would look like.

Scotland has everything that it takes to be an extremely prosperous and successful independent nation, and more. Scotland with only 8.4% of the UK population possesses 34% of the UK’s natural wealth.

This prompts the question – why does a naturally wealthy nation with a strong, resilient and diverse onshore economy, booming exports, a highly educated population, low unemployment, a wealth of oil and renewables, and a wide range of strong economic sectors have a set of accounts (GERS) that suggest that Scotland’s finances are weak? That is a trick question, it doesn’t. GERS is not a set of accounts for spending in Scotland it contains spending outside of Scotland that doesn’t benefit Scotland economy and that Scotland didn’t generate. GERS also contains clear evidence of mechanisms for removing wealth from Scotland’s accounts which then creates a phoney deficit. There are actually several hidden mechanisms for stealthily removing Scotland’s wealth.

Keywords

Scots remain confused over who sets tax rates

Stephen Richard — Sun, 14 Nov 2021 21:34:10 +0000

Scots remain confused over who sets tax rates

Primary Author or Creator

Terry Murden

Stephen Richard Sun, 11/14/2021 - 21:34

Additional Author(s) / Creators

Diffley Partnership

Date Published

Sat, 06/05/2021 - 12:00

Alternative Published Date

April 6, 2021

Category

Taxation

Type of Resource

Article

Fast Facts

Scots continue to be unclear about who is responsible for taxation north of the border.

More details

More than a quarter (26%) of those polled in a survey said they were “not aware of” the Scottish Parliament’s powers to make changes to income tax rates in Scotland, and more than 80% admit they need more information on how the system works.

The latest data shows an improvement on the findings of previous surveys. In 2018, 66% were unaware that income tax is the responsibility of both Westminster and Holyrood.

However, the Chartered Institute of Taxation (CIOT) and ICAS (the Institute of Chartered Accountants of Scotland) are calling on Scotland’s political parties to improve public awareness of devolved taxation in the next Scottish Parliament.

The tax and accountancy bodies make the call in a new paper, Building a Better Tax System, setting out their priorities for the devolved tax system in the next Scottish Parliament.

The poll of 1,098 adults in Scotland was undertaken by the Diffley Partnership in March 2021. It is the third to be commissioned by CIOT since the introduction of Scotland’s new income tax regime in 2018.

The 2021 poll found that:

33 per cent of those surveyed said they were unaware that the Scottish Parliament had made changes to the tax system since 2015 (such as to income tax and council tax).
26 per cent said they were ‘not aware of’ the Scottish Parliament’s powers to make changes to income tax rates in Scotland, while 25 per cent said the same for Holyrood’s powers over Council Tax, Business Rates and Land and Buildings Transaction Tax
Just over one in four (27 per cent) correctly identified that income tax powers are shared between the Scottish and UK parliaments, a fall of 4 points since the survey was first conducted in 2018
83 per cent of Scots surveyed think they need better information about how taxes are decided in Scotland. This compares to 86 per cent in 2019 and 84 per cent in 2018
39 per cent knew a little or a lot about the Scottish Taxpayer status (the rules that define who is eligible to pay Scottish Income Tax) . This is an increase on the 34 per cent who answered in this way in 2019, but is 9 per cent lower than the 2018 survey

The steps that CIOT and ICAS would like to see introduced in the next Scottish Parliament include:

Strengthening parliamentary scrutiny of tax by introducing a Scottish equivalent of the Westminster Finance Bill to make changes to the tax system easier and more visible and removing the constitution remit from the Finance Committee to enable it to spend more time scrutinising tax policy
Better budget coordination between the Scottish and UK governments to overcome recent budget delays that the organisations say have ‘cut across the devolution settlement’
Limiting the use of Holyrood’s tax powers as a source of ‘last minute budget concessions’ and moving towards the development of a longer-term approach to tax policy development that considers existing tax powers alongside any future proposals for new taxes
Improving public awareness and understanding of the Scottish tax regime through improved visibility of tax in the Scottish political calendar and promoting tax education within the Scottish curriculum

Alexander Garden, chairman of the CIOT’s Scottish technical committee, said: “As political parties set out how they plan to use Holyrood’s tax powers, it should be concerning that a third of respondents are unaware that the Scottish Parliament has made changes to the tax system in Scotland.

“The case for increased awareness has arguably been made stronger by the devolution and divergence that has taken place in recent years.

“As taxes account for a significant amount of money spent by Holyrood, it should be a priority of the next Scottish Parliament to ensure that taxpayers can understand more about Scotland’s tax powers and the changes that are being made in their names.”

Charlotte Barbour, director of taxation at ICAS, added: “The reality is that at present, many of the day-to-day changes needed to maintain the integrity of the devolved tax system are either not happening, due to a lack of parliamentary time, or in a way that limits detailed scrutiny.

“Having an equivalent to the UK Finance Bill at Holyrood is one of the ways that awareness of Holyrood’s tax powers could be boosted, by making sure that tax policy is more visible in the Scottish political calendar.

“Increased awareness will become more important if discussions around the role of the Scottish tax system increase in prominence as we emerge from the pandemic.”

On the need for a more strategic approach to making Scottish tax policy, Alexander Garden added: “We would like to see our MSPs taking a longer-term approach to thinking about how the Scottish tax system works.

“We need to move away from the recent trend that has seen new tax measures brought in at short notice with limited consultation in exchange for parliamentary votes, and towards an approach that focuses not just on new taxes, but on how we use those we already have more effectively.

“This should include better coordination between the Scottish and UK governments around the timing of future budgets.

“The delays to the last two UK Budgets have highlighted challenges for Holyrood when faced with the need to agree tax and spending plans without full sight of the UK picture. We hope that will change.”

Resource Address (URL)

https://dailybusinessgroup.co.uk/2021/04/scots-remain-confused-over-who-sets-ta…

Keywords

tax

Taxation

Language English

How smarter taxation would help build a fairer Scotland

Stephen Richard — Fri, 05 Nov 2021 12:34:35 +0000

How smarter taxation would help build a fairer Scotland

Primary Author or Creator

Believe in Scotland

Stephen Richard Fri, 11/05/2021 - 12:34

Alternative Published Date

2021

Category

Taxation

Type of Resource

Article

Fast Facts

It is evident that there is a desire for change to the current UK taxation system. This emphasises the need for the powers to be devolved to the Scottish Parliament. The Scottish government’s proposed changes to create a fairer taxation system, particularly the concept of incentivising corporate tax is welcomed.

More details

The UK taxation system

The UK’s tax system is widely recognised as dysfunctional. It is complex, ineffective and very centralised. Furthermore, any reforms that have been introduced have failed to keep up with economic and societal changes. The UK government often cuts corporation tax, which currently sits at 19%, in an attempt to make businesses more competitive and stimulate investment.

While it is true that too much tax can lower profitability and ultimately slow down private sector investment, this notion is not relevant to the UK’s current situation. Indeed, the UK government has no reserves and instead possesses a massive sovereign debt.

Cutting taxes will not stimulate the economy and will instead directly impact front line services

Furthermore, Brexit has greatly damaged private sector investment and the Covid-19 pandemic has had, and will continue to have, a critical and long-lasting impact on the economy.

Therefore, with the UK’s current economic situation looking rather grim, it is clear that cutting taxes will not stimulate the economy and will instead directly impact front line services.

Unified taxation powers

Corporation tax cuts can work, but only as part of a collection of flexible taxation powers and policies. For taxation policy to be successful it must involve a wide range of unified tax powers, otherwise the weight of taxation will be placed too heavily on one societal group. This issue has been recognised within the Social Justice and Fairness Commission’s report, highlighting that the burden of taxation must be shifted. The Joseph Rowntree Foundation has revealed that “the total cost of poverty to the UK economy is in the region of £78bn per year”.

A more balanced approach to taxation can be achieved in an independent Scotland. Indeed, with progressive policies such as those that Business for Scotland have advocated for years and that have now been proposed in the SNP’s report, Scotland can achieve a fairer tax system.

Changing behaviour

In 2019, we suggested to the Scottish government that rather than implementing ‘something for nothing’ tax cuts, taxation should be incentivised. For example, solutions such as benefit corporation tax credits could be introduced.

In the commission’s report, it is stated that taxation should be “used to influence actions or behaviours that generate good outcomes for society.”

This complements our campaigning and the ideas that we have proposed within many of our articles and reports. For example, in a previous article we offered a hypothetical scenario in which this concept was implemented:

Imagine if Scotland decided to avoid corporation tax cuts and instead raised taxation by 1%. While some may fear a decline in competitiveness, we suggest that this could be resolved through the numerous benefits of linking corporate taxation to the business pledge.

Under this system, businesses that are willing to make positive changes to company behaviour and support a more equal society will pay less in tax

This pledge asks businesses to behave in a way that benefits the company, wider society and the economy by changing corporate behaviours. However, because there is currently no profit to be gained from signing this pledge, it is easily ignored. Therefore, we advise that corporations should be able to earn back this loss and also gain further tax credits by signing this pledge and positively changing their behaviour. This may involve targeted investment and corporate behaviours that help create a better, fairer and more prosperous Scotland.

Positive changes rewarded

Under this system, businesses that are willing to make positive changes to company behaviour and support a more equal society will pay less in tax.

This system will fund itself with its benefit/cost approach. For example, corporates that invest in environmentally sustainable practices would pay less in taxation, but their contribution to society would help efforts to tackle the climate crisis and boost Scotland’s environmental and recycling sectors.

This concept of incentivising corporate taxpayers will also improve the growing issue of tax evasion and avoidance that exists across the UK. With the obvious benefits of this system, corporates are more likely to pay their taxes and ultimately this will increase Scotland’s taxation revenues by several billion every year.

Conclusions

It is evident that the people of Scotland and the Scottish government desire change to the current UK taxation system and this emphasises the need for the powers to do so to be devolved to the Scottish Parliament. We welcome the Scottish government’s proposed changes to create a fairer taxation system, particularly the concept of incentivising corporate tax.

Resource Address (URL)

https://www.believeinscotland.org/how-smarter-taxation-could-help-build-a-faire…

Keywords

Taxation

Corporation Tax

Language English

THE IMPACT OF SCOTTISH INDEPENDENCE ON TAX, PENSIONS AND FINANCIAL SERVICES

Stephen Richard — Mon, 04 Oct 2021 18:20:41 +0000

THE IMPACT OF SCOTTISH INDEPENDENCE ON TAX, PENSIONS AND FINANCIAL SERVICES

Primary Author or Creator

Clifford Chance

Stephen Richard Mon, 10/04/2021 - 19:20

Alternative Published Date

August 2021

Category

Taxation

Pensions

Finance

Type of Resource

Assessment report

Length (Pages, words, minutes etc...)

7pp

Fast Facts

The most likely overall outcome for taxation is that rUK would treat Scottish individuals and companies in the same way as it treats any other country's individuals and companies (and vice versa). Scotland will need to establish its own financial regulator and resolution authority and make arrangements for continuing the licences and supervision of Scottish firms. Arrangements for pension investments and payments will be required.

Resource Address (URL)

https://www.cliffordchance.com/content/dam/cliffordchance/briefings/2021/08/the…

Keywords

Taxation

Financial regulation

Pensions

Language English

The Politics of Scotland’s Public Finances

Stephen Richard — Sat, 02 Oct 2021 17:46:49 +0000

The Politics of Scotland’s Public Finances

Primary Author or Creator

David Heald

Stephen Richard Sat, 10/02/2021 - 18:46

Additional Author(s) / Creators

Michael Keating,

Alternative Published Date

2020

Category

Public Finance

Type of Resource

Academic Paper

Fast Facts

The early operation of the 2016 Scottish Fiscal Framework and the divergence of UK and Scottish income tax rates highlights the practical issues of devolved tax policy in the context of UK fiscal centralization.

More details

Politics and fiscal mechanics play interwoven roles in the public finances of devolved Scotland. Asymmetric devolution, in the context of divergent economic performance and relative population size and growth rates, has contributed to the longevity of the Barnett formula. Though criticized for either overfunding or underfunding Scotland, its resilience stems from its role as political convention in reducing overt conflict, and from maintaining the expenditure autonomy of the Scottish Parliament. The low level of self-financing from devolved taxes stimulated allegations that the Parliament lacked accountability and fiscal responsibility. Extended taxation powers advanced through the cautious Calman Commission to the rushed Smith Commission, and were driven by imperatives for a ‘counter-offer’ after the 2014 Independence Referendum. The early operation of the 2016 Scottish Fiscal Framework and the divergence of UK and Scottish income tax rates highlights the practical issues of devolved tax policy in the context of UK fiscal centralization. These developments have been driven by changes in Scottish political circumstances rather than by changes in fiscal fundamentals.

IN: The Oxford Handbook of Scottish Politics

Paywall

Resource Address (URL)

https://www.oxfordhandbooks.com/view/10.1093/oxfordhb/9780198825098.001.0001/ox…

Keywords

Devolution

Public finance

Taxation

Language English

TAX POLICY FOR AN INDEPENDENT SCOTLAND

Stephen Richard — Fri, 01 Oct 2021 22:10:22 +0000

TAX POLICY FOR AN INDEPENDENT SCOTLAND

Primary Author or Creator

Richard Murphy

Stephen Richard Fri, 10/01/2021 - 23:10

Additional Author(s) / Creators

Scottish Independence Convention

Alternative Published Date

2020

Category

Taxation

Type of Resource

Policy Paper

Length (Pages, words, minutes etc...)

11pp

Fast Facts

The current UK tax system is not fit for purpose in Scotland. It is vital that during the transition period new systems for managing tax in Scotland be put in place. Taxes will need to be placed on a variety of sources and some of these will need extensive consideration. The tax and benefit systems must be integrated.

More details

Scottish Independence Convention (SIC) Transition Paper No. 5 Taxation.

Resource Address (URL)

https://independenceconvention.scot/transitions

Keywords

Taxation

Public revenue

social benefits

Language English

Small states in a big world

Stephen Richard — Thu, 30 Sep 2021 06:57:15 +0000

Small states in a big world

Primary Author or Creator

Michael Keating

Stephen Richard Thu, 09/30/2021 - 07:57

Additional Author(s) / Creators

Centre on Constitutional Change

Alternative Published Date

2021

Category

Independence

Type of Resource

book

Length (Pages, words, minutes etc...)

8pp

Fast Facts

Small countries are vulnerable in a world of large states. But they may have opportunities not open to their larger neighbours. This work examines three different models of adaptation, concluding that, whichever model is adopted, it will require internal reform as well as external independence.

More details

pp 223 - 270 in Scotland’s new choice Independence after Brexit, 2021

Resource Address (URL)

https://www.centreonconstitutionalchange.ac.uk/sites/default/files/2021-03/Scot…

Keywords

Language English

How would an independent Scotland pay for it?

Stephen Richard — Wed, 29 Sep 2021 14:02:31 +0000

How would an independent Scotland pay for it?

Primary Author or Creator

Cameron Archibald

Stephen Richard Wed, 09/29/2021 - 15:02

Additional Author(s) / Creators

Bella Caledonia

Date Published

Sat, 02/08/2020 - 12:00

Category

Economy

Type of Resource

News Media

Fast Facts

It’s that time of year again when unionists start spreading lies about how an independent Scotland is subsidised by taxpayers money from the rest of the United Kingdom.

Resource Address (URL)

https://bellacaledonia.org.uk/2020/02/08/how-would-an-independent-scotland-pay-…

Keywords

Public Debt

Public revenue

Taxation

Language English

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