The first session on Scottish devolution proposals was held today by the House of Commons Treasury Committee with the heads of tax of the ACCA, the ICAEW and the Chartered Institute of Taxation answering the committee’s questions.
The accounting bodies’ representatives highlighted the short timeframe which was set for devolution of tax powers to Scotland and suggested that a longer timeframe should be considered in order to properly tackled all the issues arising from devolution.
Asked which powers should be devolved, ACCA head of taxation Chas Roy-Chowdhury responded that the lesser devolution the better. "But the status quo is not an option and is not possible," he added.
Roy-Chowdhury said further devolution will bring complexity to the UK tax system, and the level of complexity will be determined by how much change the Scottish government will bring to the tax they will receive powers for.
All witnesses agreed that the fundamental questions that needs to be answered before devolution goes forward is to determine how many tax payers Scotland has and therefore the portion of tax they will receive as a consequence of devolution.
"Scotland needs to know how many tax payers they have for their own budgeting purposes," Roy-Chowdhury said.
As of now, this number has not been established and there is a risk that with devolution and the divergence in tax rates between Scotland and England citizens living on the border might choose to move on one side or the other.
Chartered Institute of Taxation tax policy director Patrick Stevens explained: "Any situations with two countries having different tax systems and a border easily crossed will provoke changes in behaviours. I’m only referring to people choosing where they live and not to illegal practices."
He added that he didn’t believe the question of devolution raised the question of tax avoidance.
John Thurso MP asked the witnesses: "Can you devolve the power to raise tax and not devolve the power to change the tax rates?"
To which Stevens replied it was possible but it came back to the fundamental question of the size of the tax base meaning how much will be raised by each regions and from whom.