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Taxing times

Brian Taylor | 14:42 UK time, Monday, 22 November 2010

This, lest it had escaped your notice, is apparently shaping up to be "the most difficult week" of John Swinney's Ministerial career. According to the Labour Party.

It should be noted that the said J. Swinney looks and sounds remarkably sanguine for someone allegedly poised for the political guillotine.

That said, the Scottish Government has appeared less than entirely comfortable in its handling of the vanishing tax power (disclosed to an astonished nation by me, among others, last Thursday.)

In summary, then. The Scottish Parliament has the power to vary the standard rate of income tax up or down by a maximum of 3p in the pound.

This is set out in the Scotland Act 1998 (Part V, if you need to find it in the copy by your bedside.)

'They say no'

This power, once so contentious that it merited a separate question in the 1997 referendum, has never been used for the good and sensible political reason that it would generate more grief than revenue.

As things stand, it does not look like being used any time soon. The governing SNP once flirted with a "penny for Scotland". Now - and for the future - they say no.

Ditto Labour, the Conservatives and the Liberal Democrats who propose instead to reform the tax powers of Holyrood, as set out in the Calman Report.

Enter Her Majesty's Revenue and Customs. In order to prepare for the prospect of the Tartan Tax in the first instance, they extracted £12m from the Scottish budget. (They're good at that sort of thing.)

That down payment at the onset of devolution was followed by £50k per annum up to 2007 when, according to the Scottish Government, the contract ran out.

Again according to Scottish Ministers, HMRC then indicated they planned to upgrade their IT (not, again, an unknown event at the Queen's revenue.) Scottish dosh was seemingly demanded.

It is there that interpretations differ. According to the Scottish Secretary Michael Moore, there was neglect and delay on the part of the SG. Finally, according to the SofS, the SG vetoed any payment in August this year, thus causing the tax power finally to lapse.
Mr Swinney's version, in a letter today, is that his officials were still seeking talks and clarification in August 2010. As I disclosed last week, the bill presented by HMRC at that point was £7m.

Real questions

Enter Labour. Why, they ask, did John Swinney not disclose details of the emerging problem? Did he mislead Parliament when he told MSPs in his Budget statement that he had ruled out resorting to the Tartan Tax - when he knew at the time that the tax was in limbo?

Intriguing questions. Enter Team Swinney in response. See the letter, they say. We were still seeking clarification from HMRC.

It has always been the case that it would take an extended period to put the Tartan Tax into action.
Further, from Team Swinney.
Now that Michael Moore has put the issue on the table, perhaps he might care to explain who would pay for implementation costs of the Calman Tax?

Would it be the Scottish Government, as with the Tartan Tax. Or would we follow the precept that he who orders a functional change, bears the cost? (Think tunes and pipers.)

To conclude. Mr Swinney has questions to answer. Real questions as well as partisan questions. (The two are seldom the same.)

He may face some of those from the Finance Committee tomorrow - although it is thought more likely that the substantive exchange will occur when the Minister makes a statement to the full Parliament.


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