• Text size      
  • Send this article to a friend
  • Print this article

Taxing question for Scots and HMRC

The referendum on Scottish independence may be two years away, but it has already been dominating Scottish political debate for almost as long.

Discussions on issues such as a hypothetical independent Scotland's status in Europe and its membership of Nato have taken centre stage, relegating the ongoing business of government in Scotland to second rank. Questions of "what if" are eclipsing the reality of what is.

That may help to explain why there has been relatively little discussion of the major change to Scots' income tax arrangements which will come into force in April 2016 under the Scotland Act.

From that point onwards, about half of income tax will be raised by the Scottish Government and the rest at UK level, a move designed to make the Scottish Parliament more financially accountable.

HM Revenues & Customs (HMRC) have the task of setting up new computer systems to identify Scottish taxpayers and collect the new tax, and will be paid for doing so by the Scottish Government to the tune of £45 million, with ongoing maintenance costs of £4.5m a year thereafter. So far, so sensible.

Yet the inglorious history of large-scale public sector ICT projects – the busted budgets, technical problems and frayed nerves – should give pause for thought. Problems could arise. Having more complicated income tax arrangements for Scotland than for the rest of the UK could make for a more inefficient system of collection where Scots are concerned.

That is why Iain Gray, chairman of the Scottish Parliament's audit committee, is quite right to argue for special powers of oversight for Holyrood over HMRC in respect of this project, so that HMRC officials responsible for collecting Scots' taxes are directly answerable to Holyrood and the Scottish Government. This is the best way to ensure taxpayers are getting value for money.

Getting this right should be a priority for those on both sides of the political divide. The SNP is less interested in the Scotland Act than the greater goal of independence, yet it is in the party's strategic interests to ensure the new tax system is as efficient as possible.

Even if Scots voted Yes in the referendum, the new system would likely be in force for some time and as voters weigh up which way to jump in that referendum, they are likely to be reassured if the transition to the new tax system is going smoothly; they may have serious doubts about the much greater challenges posed by independence, however, if it is not.

If Scotland votes No to independence, meanwhile, this is the system of taxation Scotland is likely to be using for many years to come.

Whatever the outcome of the independence referendum, a well-managed tax system post-2016, one which is responsive and accountable to the Scottish Parliament, is in the best interests of the Scottish people.

Contextual targeting label: 
Business

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

126427