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Scots tax collection ‘could sideline MSPs’

By Keith Aitken in Edinburgh | 19 November 2012

MSPs are expected to call for greater oversight over Revenue & Customs once Scotland’s new tax varying powers take effect.

R&C permanent secretary Edward Troup, who has been appointed accountable officer for the Scottish Rate of Income Tax, will appear before Holyrood’s audit committee on Wednesday. He is likely to hear a range of worries about the Parliament’s lack of supervision over the new power, which comes into effect in 2016.

Audit committee chair Iain Gray, a former Scottish Labour Leader, said today that MSPs were concerned that they would be unable both to inquire properly into any R&C problems collecting the tax or to monitor the cost to the Scottish Government of introducing and running the new system.

He said there were also concerns about whether details of Scottish collection rates would be adequately disaggregated in R&C accounts; over how the department would define Scottish taxpayers (for example, those who live and work on different sides of the border); and over the fact that Holyrood could only invite, not summon, R&C officials to appear before it.

‘We can’t have a situation here where the accountable officer doesn’t feel an obligation to report to us,’  Gray said.

‘There is not an obvious role for Audit Scotland and I think we will want to pursue that with the National Audit Office and with Audit Scotland,’ he added. ‘I think Audit Scotland are of the view that, when it comes to investment in the IT system, that is money that’s coming from the Scottish Government and I think Audit Scotland will feel they are obliged to audit that expenditure.’

Scottish ministers face a bill of £40m–£45m to set up the new collection system for Scotland within R&C, and annual running costs thereafter of £4.2m once the Scottish Rate of Income Tax is active from 2016. As the tax is not devolved, it will continue to be collected by R&C rather than Revenue Scotland, which will collect the devolved successors to stamp duty and landfill tax.

That means that R&C will be accountable for the tax to Westminster through the NAO, rather than to Holyrood through Audit Scotland.

When the SRIT comes in, Scotland’s block grant from London will be cut by the equivalent of 10p on the basic rate of income tax, or some £4.4bn of revenue, leaving Holyrood to make up the shortfall by levying income tax above the first 10p at whatever basic rate it sees fit. 

Meanwhile, a study by the Institute for Fiscal Studies, to be presented at a seminar in Edinburgh this evening, argues that an independent Scotland could be well placed in the short term to fund its public spending commitments, but would face harsh fiscal choices once North Sea oil revenues began to decline.

The IFS estimates per capita spend in Scotland to be about £1,200 per annum higher than in the rest of the UK, in part reflecting different geography and social conditions, but also facilitating expensive policies such as free personal care for the elderly and fee-free higher education.

The paper has ignited debate between the two sides in the referendum campaign. Scottish Finance Secretary John Swinney said independence would allow Scotland to face its choices from a stronger economic position than the rest of the UK, but former chancellor Alistair Darling, who chairs the Better Together pro-union campaign, said Scotland would be left exposed to ‘notoriously volatile’ oil prices.

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