Scotland Stumbles on Devolution Plans

September 7, 2011 Taxation in UK

John SwinneyScotland’s intentions for a devolved tax system have been criticized by the UK government, with several shortcomings in the plan being highlighted.

Scotland’s bid for a devolved tax system has taken a stumble, as the push for greater tax powers is called unclear and inherently filled with significant risks and costs. The judgment came in a letter sent on September 6th to Scottish Finance Secretary John Swinney from the Exchequer Secretary to the Treasury of the UK David Gauke.

In the correspondence, the Exchequer Secretary warned that the currently proposed plan to devolve Scotland’s tax system was fraught with oversights and needs clarification before it can become a reality. He said that in order for Scotland to devolve its tax system, it would first need to build its own fully functioning IT infrastructure to administer taxes. The technological acquisition would need to be accompanied by an array of local tax experts. Further, both the UK and Scotland would need to implement measures to control and administer the newly formed tax border. The Exchequer Secretary suggested that these factors have not been considered in the devolution plans, and no account has been made for the rising costs.

The issue of an independent tax system for Scotland has been long debated in the UK. Currently the Scottish government is taking public opinion on the matter, through national discussion paper which outlines the government’s proposed devolution plans.

In his letter, David Gauke said that the Scottish economy is very integrated with the UK, and this level of economic closeness means that Scotland’s situation is very unique, and has to be evaluated further, before any practical moves are made.

Photo by theSNP