Tax is really complex, but where is the law?

The Scottish budget has heaped more complexity on an already complex income tax system. There are to be two new rates for taxpayers on low and middle incomes.

Already, a UK taxpayer may have income that is charged at default rates, savings rates and Scottish rates. These rates include:

the default basic rate, the default higher rate, the default additional rate, the savings basic rate, the savings higher rate, the savings additional rate, the starting rate for savings, the savings nil rate, the dividend nil rate, the dividend ordinary rate, the dividend upper rate, and the dividend additional rate …

That list is drawn from a quick look at sections 6 to 16 of the Income Tax Act 2007, as revised, published in Tolley’s Yellow Tax Handbook. (Other handbooks are available.) Continue reading Tax is really complex, but where is the law?

Scottish tax plans create additional complexity and anomalies, experts warn

Planned changes to Scottish rates of income tax would add further complexity to a system that is already difficult for taxpayers to understand, tax professionals said after Derek Mackay, cabinet secretary for finance and the constitution, set out Scotland’s draft budget on December 14.

“Complexity is the price Scots will pay for exercising devolved powers over income tax. Today’s announcement underlines the increasingly diverging nature of income tax between Scotland and the rest of the UK,” said Moira Kelly, chair of the Chartered Institute of Taxation’s Scottish Technical Committee. The proposals have the potential to “increase both the costs and complexity of administering Scottish income tax as well as throwing into the mix some interesting anomalies,” she said.

The changes would establish Scotland as “a country with a very distinct tax system from the rest of the UK,” said Lindsay Hayward, head of tax for PwC in Scotland.

My news story for Tax Analysts, December 15 (paywall)

UK government defends finance bill process amid concerns over scrutiny

Members of Parliament will have time to fully scrutinise the UK finance bill’s measures, Financial Secretary to the Treasury Mel Stride insisted after opposition MPs claimed that the government is seeking to avoid “proper scrutiny and transparency.”

Stride rejected opposition claims that the government is restricting the scope for amendments as MPs debated the bill at its second reading on December 11. Scottish National Party MP Kirsty Blackman asked why the government did not present an “amendment of the law” resolution for debate after the autumn budget on November 22.

My news story for Tax Analysts, December 14 (paywall)

‘Sufficient progress’ claimed in Brexit talks while businesses call for clarity

The European Commission is satisfied that “sufficient progress has been achieved” on three priority issues in phase 1 of the Brexit talks, the commission announced on December 8, while questions remained about the implications of commitments given regarding Northern Ireland.

It is now for the European Council to decide at a December 15 meeting whether the negotiations should proceed to their second phase, the commission said, adding that its assessment, set out in a communication to the European Council (Article 50), was based on a joint report agreed by negotiators and endorsed by UK Prime Minister Theresa May and Commission President Jean-Claude Juncker.

My news story for Tax Analysts, December 8 (paywall)

BEPS experts ponder uncertain future for arm’s-length principle

The arm’s-length principle for international transfer pricing continues to have widespread support, a senior OECD official told a London conference amid concerns about the effectiveness of the base erosion and profit-shifting project.

A discussion on the future of the arm’s-length principle on November 29 was hosted by the Oxford University Centre for Business Taxation, whose director Michael Devereux noted that the BEPS project has “triggered a material hike in the complexity of applying” the principle. Richard Collier, an associate fellow at the Centre for Business Taxation, warned that “a continued vulnerability to avoidance will present recurrent and profound difficulties.”

Tomas Balco, the recently appointed head of the transfer pricing unit at the OECD’s Centre for Tax Policy and Administration, offered a personal perspective of “where countries think we are” in relation to the arm’s-length principle … Noting that a previous speaker argued that the principle may not have a long-term future, Balco said feedback from delegates to the OECD’s Working Party 6 on transfer pricing suggests that “nobody thinks the patient is dying.” Read more:

My news story for Tax Analysts, December 2 ($)