Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

CIOT flags UK ‘tax competition’ challenge

by
19th Sep 2014
Save content
Have you found this content useful? Use the button above to save it to your profile.

Politicians must confront “the crucial question” of how much tax competition they are willing to entertain within the UK, the Chartered Institute of Taxation has warned after the prime minister called for a “new and fair” devolution settlement.

David Cameron said he would work to ensure that commitments made on further powers for the Scottish Parliament would be “honoured in full”, after Scotland voted to remain part of the UK. But England, Wales and Northern Ireland should also be able to vote on issues of tax, spending and welfare, he added.

Cameron had opened the door for sweeping constitutional reform of the UK, the Financial Times reported.

The CIOT called on “all those involved in the devolution convention which begins work today to address the practical nature of how two tax systems will impact on where taxpayers decide where to live, where businesses decide to base their operations, where business is done in the UK, and where businesses decide to invest”.

Moira Kelly, chair of the CIOT’s Scottish technical sub-committee, said: “In anticipation of a ‘devolution convention’ for the Scottish Parliament, politicians of all colours and stripes must be clear about what tax decisions they are willing to devolve, in addition to explaining what effect multiple tax systems will have upon the UK-wide economy.

“The political convention provides an opportunity for Scotland and the UK to address what can be done with taxation in terms of devolution, and how differential tax rates, thresholds and allowances will affect the operational make-up of the UK economy.”

In a briefing last week the CIOT said that, based on the published recommendations of the three main UK parties, any consultation on further tax devolution was likely to focus on personal taxation, and income tax in particular.

“There is some support for devolving air passenger duty, and to a lesser extent capital gains tax and inheritance tax,” the CIOT said. “There appears to be little support for devolution of additional business taxes to Scotland.”

ICAS, which represents chartered accountants in Scotland, welcomed the appointment of Lord Smith of Kelvin to oversee the process for further devolution. ICAS chief executive Anton Colella said the Scottish referendum campaign had “energised the democratic process and changed the UK irrevocably”.

She added: “Now is the time for everyone in business and politics to come back together to build the economy, create wealth and deliver a fair and prosperous society.”

‘Tax policy will be central’

Andrew Watters, a tax specialist at the law firm Thomas Eggar, said: “It will not be a return to business as usual north or south of the border. The question on independence now moves to questions of power, economics and, as an economic lever, tax.”

Tax policy will be central, he said. “Should tax be low to encourage investment and grow wealth, or high to maximise distribution and create ‘a fairer society’? What does a fair society look like? Would people be content to pay more tax if the state can guarantee certainty? How does this fit with the current debate on when acceptable tax planning drifts into unacceptable tax avoidance? Is the provision of tax incentives incompatible with a fair society?”

Related articles:

Tags:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.