Experts warn over tax devolution
Scottish Government must work closely with councils to ensure devolution of taxation powers to Scotland brings tax and welfare systems together, according to experts.
The Chartered Institute of Taxation (CIOT) also warned draft legislation could have ‘unintended complexities’, leading to double taxation on foreign income and forcing more Scottish taxpayers into self-assessment.
Robin Williamson, technical director of CIOT’s Low Incomes Tax Reform Group, said: ‘Devolution of tax powers to Scotland represents an historic opportunity to align the tax and welfare systems. This would help to ensure that the taxpayer and claimant has one port of call, particularly where there are interactions between tax, benefits and credits.
‘In order to ensure this happens there must be a concerted collaborative effort, not only between the Scottish and UK Governments, but also between the Scottish Government and Scottish councils, if the Scottish Government decides to devolve powers to a more local level.’
Moira Kelly, chair of CIOT’s Scotland branch, said: ‘Simplicity must remain the foundation stone of tax devolution; income tax is one area where things will become more complex. For those whose residence status may change during the year, the only way of resolving their tax position will be via self-assessment since it will only be possible to determine their final residence status in retrospect. This may force many more taxpayers into self-assessment. It is essential that HMRC systems are able to cope with this increased demand.
‘Double taxation is another area of concern: it is essential that that current double taxation agreements between the UK and other countries treat Scottish income tax in the same manner as UK income tax. It is not only new Scottish taxes that could lead to double taxation, but also new UK taxes. Therefore, this process needs to consider, in addition, new taxes proposed by the UK Government.’
