Those who’ve been around long enough might recognise the title as the first line of “Taxman” in which Lennon/McCartney dipped their pens in vitriol and had a right go at HM Revenue & Customs the thick end of fifty years ago. The more clear-sighted of those arguing for independence have no truck with the similarly girning approach favoured by unionists, who would have us believe that the UK offers s sensible approach to taxation and our best bet for a prosperous future for all Scots.
Let us, in the interests of objectivity and reasoned debate, assume that this is not absolute, 24-carat bullshit and that the intervening half-century of opportunities to improve the tax system has not been frittered away by said unionists and look at some of the options afforded an independent country like Scotland. Were we Scots to take control of our own resources we could then adjust our own tax system to suit ordinary Scots and not the braces-snapping masters-of-the-universe who inhabit London’s financial centres. Such brash loadsamoney gents brought you both eye-popping fiscal idiocy of 2007/8 and the eternal 7-figure bonus—yet prosper, no matter how execrable the job they do.
Some options open to the first Finance Minister of an independent Scotland (my thanks for most of these ideas to the thoughtful and measured James Aitken).
- Value Added Tax. Currently still at a pip-squeaking 20%, this was raised from 17.5% by Alastair Darling in one of his first panic moves. Although food and children’s clothes still evade VAT and energy is only taxed at 5%, it is still a huge fiscal burden—as is VAT itself on the SMB forced to play taxman for the Chancellor. But if this were dropped to a low or zero rate for key areas desperate for relief and that would improve both employment and the economy—prime example is on home repairs and renovations (around 20% of Scotland’s currently stalled £10bn construction industry) that would be a shot in the arm to the SMBs who provide it—the revenue loss could be offset by hugely increased turnover in a matter of months, if not weeks.
- Charities. While there is no doubt that charities do superb work across the country and the selfless involvement of many volunteers save the state from having to spend huge amounts of public money, there are a number of cases where we are all being taken a len’ o’. Prime among these are private schools which duplicate the public system and contribute more to ossifying social mobility and preserving inequality than all the 700+ Lords (both hereditary and fabricated) put together. Almost 5% of all pupils in Scotland contribute £300m to 100 schools who avoid all tax. Similar unfairness is on display on every High Street where charity shops compete with ‘real’ businesses at discounted rates, yet support a complex management structure (including purchasing of new materials to sell) that pulls down some very nice wages while other shops go under: more than 50 charity Chief Executives pull down over £100,000 a year each.
- Financial Markets. Although Edinburgh remains an important financial centre, it does not boast an important stock exchange. Nonetheless, there is an opportunity to build of financial skills by restructuring our separate Companies House, Stamp Office and Registers of Scotland and combining this with a financial transaction tax (currently under consideration within the EU) to both facilitate ordinary trades and to put a brake on profitable artificial shuffling of funds done by the few in the know.
- Petrol Tax. This has been used as an infinitely elastic source of funds by successive UK governments under the devious guise of a ‘green’ tax. The distances involved in much of Scotland has meant it has been proportionally unfair for those living in the more remote parts where competition among petrol suppliers is non-existent. Replacing it with a real ‘road tax’ that charged for congestion and busy times but was much lighter for off-peak or little-used road travel would decongest town centres, boost public transport and be entitled to real green credentials all in one fell swoop.
- Local Taxation. After the Poll Tax debacle we have struggled along with the pig’s breakfast of council tax that is badly regressive and not fit for purpose. Each government has shied away from making another ‘poll tax’ mistake. The idea of a Local Income Tax has merit but still doesn’t address the anomaly of large property and/or holdings so rampant in Scotland. A combination of a basic charge for services with graded taxes on income AND property held would be fairer, especially if second homes attracted additional taxes and surcharges for non-Scots residents were punitive. The resulting span would be far wider than the narrow ‘bands’ give just now. (A suggestion how this might have an intermediate stage of a fairer council tax was outlined here last September in Ma Faither’s Howff.) This has the secondary benefit of supplying closer to 40% of a council’s funding under its own control, allowing local decisions to be less affected by centrally held purse strings.
- Tax Avoidance/Evasion. Perhaps the gnarliest of the problems facing a Scots Treasury would be the extent to which it is bound to England (through using the £?) and its quaint tolerance of tax sleights-of-hand available to current UK companies via Jersey/Isle of Man/Cayman/etc-based subsidiaries. Maybe the best way to beat them is to join them. What if, in order to persuade them not to pursue their own independence, the new Scotland set up Orkney and Shetland as new energy-based financial centres with their own investment incentives and corporation taxes?
- Energy Advantage Subsidy. Just as the Chinese government has provided major incentives to a range of solar cell companies for a long-term solution to its horrific carbon footprint and endless demand for energy, what if the Scots government used a chunk of the oil tax revenue to incentivise European neighbours to buy Scots-generated green energy, to participate in a North Sea distribution grid to assist in its distribution and to install Scots-built wind, wave and tide farms in countries too far away from the North Sea to benefit from the first two. By becoming the powerhouse of Europe, we would secure a better future than rich countries of the Gulf—unlike oil or gas, wind/wave/tide never run out.
Let’s see what Taxman Mr Swin-ney can make of it—when he gets a chance