Independence is one thing, but then what for tax in Scotland?

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I had some interesting discussions in Scotland yesterday. One, perhaps earlier in the day than desirable for such issues to be considered, concerned the tax transition from the UK to an independent Scotland if that were ever to happen. There is, of course, a precedent. In 1922 Ireland became an independent state. Article 74 of its 1922 constitution said:

Nothing in this Constitution shall affect any liability to pay any tax or duty payable in respect of the financial year current at the date of the coming into operation of this Constitution or any preceding financial year, or in respect of any period ending on or before the last day of the said current financial year, or payable on any occasion happening within that or any preceding year, or the amount of such liability; and during the said current financial year all taxes and duties and arrears thereof shall continue to be assessed, levied and collected in like manner in all respects as immediately before this Constitution came into operation, subject to the like adjustments of the proceeds collected as were theretofore applicable; and for that purpose the Executive Council shall have the like powers and be subject to the like liabilities as the Provisional Government.

In other words, tax continued uninterrupted with the UK tax system being adopted in its entirety by the Irish Free State (as it then was) until such time as it could make amendments.

I strongly suspect that this would have to be the case in Scotland if it too were to become an independent country.¬†But the real question is what happens then? At the risk of simplifying Irish history somewhat grossly, in the years after independence Ireland descended into a trough of intense conservatism during which time innovation was notable by its absence. Scotland could not afford to do that. We now know the success of the modern state is far too closely related to its tax system for such an outcome to be submitted and yet, as yesterday’s hearing in the Scottish parliament showed, there is not enough tax thinking going on in Scotland right now: that is why three of the four witnesses had to come from England (albeit Alex does actually have strong Scottish roots).

This then is an issue of rightful concern and one where it is vital that recourse is not made to the usual suspects, whether they be the Big 4, a major firm of lawyers, or the tax institutes. It is all too obvious that each of these would be conflicted in offering advice: first because they do not think tax is an economic and social issue and second by the interests of the large businesses that dominate their concerns. It would be a disaster for Scotland if they were to shape its taxation future. The chance that they might wish to turn Scotland into a tax haven might also be high.

As a resukt there is an issue for those with broader concern to address. I will be musing on it. Serious thoughts are welcome.