Submitted by Sestini & Co
| on Sat, 09/13/2014 - 17:37 | In Uncategorized
As the excitement builds in anticipation of next week’s referendum (will the voters ignore the pleas and break David C’s heart after all?) I couldn’t help but reflect on how little of the news coverage has mentioned taxation.
A reasonable amount of airtime has been given to speculation of what currency the new state might use prior to possibly joining the Euro. But an independent Scotland would need to enact its own tax legislation, its own social security, its own collection and enforcement mechanisms. These taxes will in a new country, from the start need to fund the infrastructure, public sector, institutions, benefits and public amenities and repay the share taken on by Scotland of the national debt.
Right now, does anyone know what these might look like?
One assumes the intention is not to enact a carbon copy of the current UK tax system, fond as many of us are of its many quirks, foibles and complexities.
Therefore many, many questions spring to mind, a few are below:
- a flat rate of income tax/corporation tax? Or graduated rates? How high?
- what will be classed as income?
- will there be a distinction between taxes for the employed, the company owner and the self-employed?
- how about a suite of US-style tax deductions, for mortgage interest, real estate taxes, etc.
- separate income tax and social security, or a combined tax for both?
- will there be tax relief for pension contributions, for investment in private companies, in films, in sustainable energy production?
- inheritance tax or an annual mansion/wealth tax?
- will Scotland have a sales tax/VAT equivalent (VAT is after all a tax of the EU)
- will there be a favourable tax regime for trusts?
- a different rate of tax for non-residents? (If so, higher, or lower?)
- how to decide whether someone is indeed resident?
- and what of fuel duty, alcohol duties and gambling?
I’m sure there will be much talk about simplification but many more questions than these need to be answered….tax is so often used as a way to encourage or discourage particular behaviours as fashions and societal norms (and occasionally medical evidence) change over time. It is said that it can also be used as a vote-winner: naturally, I couldn’t possibly comment on that.
I would be extremely impressed (actually completely stunned) if the resulting tax system was simple, coherent and easy to administer. It is thought that it could take a new Scotland as long as 10 years to put a new tax regime in place – more than one government.
And an independent Scotland’s new tax system would start life without any double tax agreements, or social security agreements. How will overseas businesses invest in Scotland and work with businesses in Scotland before these are in place? How will non-Scottish employers currently doing business there plan for their tax and employment costs going forwards?
I would love to hear from anyone who has answers to these questions, or any thoughts on how such a mammoth task might be achieved. Might it just be possible to start with something truly simple and move forward from there?