I have followed with interest the debate in The Scotsman on fiscal devolution. As principal author of the report entitled Natural Resource Taxation and Scottish Devolution published by the Independent Expert Group to the Calman Commission, I favoured a scheme of sharing North Sea oil and gas revenues between the UK and Scottish governments on a geographical basis.
The conceptual basis for this is the derivation principle, and such schemes exist in many countries with two-tier governments. We preferred a sharing arrangement rather than separate taxation systems to minimise the compliance costs.
The potential problems emanating from volatility of revenues were well understood. These can be solved by the existence of 1), an oil fund, and 2), borrowing powers for the Scottish Government.
It is also noteworthy that a scheme of sharing licence fees and royalties from North Sea oil and gas between the UK government and the governments of the Isle of Man and Northern Ireland was established as long ago as the late 1960s.
Professor of petroleum economics
University of Aberdeen Business School