Claims that the UK Treasury has started "gaming" to protect its own revenues from devolved Scottish tax competition should be given further consideration, a committee of MSPs has recommended.
Holyrood's Finance Committee is seeking further evidence on the Smith Commission's call for devolution to cause "no detriment" to any part of the UK, and how this can work in practice.
A tax expert has warned Holyrood to expect "malicious actions" by the UK Government to erode the Scottish tax base, and "malign neglect" by HM Revenue & Customs in collecting Scottish taxes if the Treasury does not have a financial stake in the Scottish income tax base.
The Treasury said there is no evidence to support the claim, but Deputy First Minister John Swinney said he has already been the victim of "gaming" when his new property tax rates were quickly undercut by the Treasury.
A Finance Committee report on further fiscal devolution states: "The committee notes that there are clear differences between the two governments regarding the clarity of the no detriment principle.
"The committee intends to take further evidence on this issue as part of its forthcoming inquiry on the fiscal framework."
It added: "The committee notes that there are clear differences between the two governments regarding the question of gaming.
"The committee recommends that the issue of gaming needs further consideration within the context of the no detriment principle."
The report quotes Professor David Heald, chair in accountancy at the Aberdeen University Business School, who warned Scotland's new tax powers may be vulnerable to gaming by the UK Government.
He warns the UK Government "will not allow Scotland to erode its own tax base and the Treasury will have retaliatory instruments".
He also suggests that if "the UK Treasury does not have a financial stake in the Scottish income tax base, I would expect both malicious actions (eroding that base through other tax measures) and malign neglect (inadequate attention being paid to interactions with other tax measures and inadequate enforcement from HMRC in the entirely new situation where determination of Scottish residence matters)".
The committee has also called for greater transparency and accountability in discussions between the Scottish and UK governments on further fiscal devolution.
Finance Committee convener Kenneth Gibson MSP said: "The lack of clarity on issues such as the calculation of the block grant and the 'no detriment' principle must be addressed prior to the implementation of new financial powers for Scotland.
"We are calling for the publication of a clear timetable for the implementation of Scotland's fiscal framework.
"In particular, we call for the timetable to allow sufficient time for parliamentary scrutiny of a draft framework so that it is clearly understood how decisions are made about the operation of Scotland's new powers."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article