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Financial framework for an independent Scotland

04/11/2013 10:11

Categories:
Scotland
Economy

Tax system could ‘give competitive advantage’

Issued on behalf of the Fiscal Commission Working Group:

An independent Scotland can deliver a modern and efficient tax system and sustainable public finances according to a team of international financial experts.

Under independence, the Scottish Government would have the opportunity to design and implement its own fiscal framework, including the operation of a tax system, an independent fiscal commission and apply a set of principles to ensure budgets are properly managed

The recommendations come in two reports from the Fiscal Commission Working Group on the fiscal framework of an independent Scotland.

The reports on “Principles of Taxation” and “Fiscal Rules and Fiscal Commissions” suggest that with independence the Scottish Government should take the opportunity to reform the current outdated UK tax system including integrating tax and welfare systems, streamlining tax legislation and making it easier to pay taxes.

The Working group also recommends that the Scottish Government’s forecasts could be scrutinised by an independent fiscal commission and that with independence the SG should follow the best practice of countries around the world and adopt a set of fiscal rules or principles.

The Working Group has also made recommendations on the establishment of a fiscal commission in relation to the taxes due to be devolved by the Scotland Act

Key recommendations of the two reports include:

1. A tax system which follows the principles of simplicity, neutrality, stability and flexibility.

2. A tax system that will minimise administration and compliance costs, maximise tax-take and boost investment and growth.

3. The establishment of a ‘tax policy forum’ to maximise transparency and integrity.

4. An independent Scotland should put the issue of globalisation at the heart of its modern tax system.

5. An independent Scottish Fiscal Commission should form a key part of the fiscal framework of an independent Scotland.

6. An independent Scottish Government should establish clear fiscal rules on debt and borrowing following the best practice of other countries.

Chair of the Fiscal Commission Crawford Beveridge said:

“Fiscal responsibility is an essential element of a successful economy – helping deliver sustainable economic growth, resilience and fairness.

“In recent years a number of countries have adopted fiscal rules and the commission believes Scotland should follow this best practice and adopt a set of principles, assessed by an independent Fiscal Commission, for managing future Scottish budgets.

“A strong set of principles combined with an independent commission to oversee them would help an independent Scotland avoid the problems that have affected the UK and other countries in recent years.

“The Fiscal Commission Working Group is clear that UK tax system is complex and costly, and there is scope for improvement in the current tax system and with independence the Scottish Government could introduce a better tax system.

“Tax and welfare systems must work together and an independent Scottish Government could align policies for both.

“An independent Scottish Government should also set up a taxation system that takes account of the changing international situation to ensure that all companies and organisations pay the tax that is due and makes it simpler for businesses to pay taxes.

“Improving the tax system could offer Scotland a real competitive advantage and adopting a clear fiscal framework based on robust and responsible analysis and expertise would ensure that Scotland benefits properly from her wealth.”

“In these reports, the Working Group has set out examples based on international best practise of how such rules and commissions could operate in Scotland, with an emphasis on ensuring any commitments are meaningful and credible.”

Finance Secretary John Swinney said:

“The Working Group has provided further thorough analysis, and I will study their proposals and recommendations for effective financial management and taxation closely.

“This administration has a proud record on managing the public finances of Scotland effectively, and we will of course build on that with the added responsibilities that come with managing all of Scotland’s taxes and spending.

“With independence we have opportunities to build on our reputation for fiscal responsibility and put in a place a framework with real credibility, something previous UK governments have failed to do, helping create the financial mess the UK finds itself in today.”

Notes to editors

The Fiscal Commission Working Group has, to date, published three reports.

The Fiscal Rules and Fiscal Commissions and Principles of Taxation papers are available at: http://www.scotland.gov.uk/Topics/Economy/Council-Economic-Advisers/FCWG

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Iain Monk
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