Scottish independence: Report examines tax system

AN INDEPENDENT Scotland should tear up the complex UK tax system and introduce a simpler system to close loopholes that cost the taxpayer billions of pounds in lost cash, according to a major new report.

The report will argue that Scotland could start with a clean sheet to clamp down on tax avoidance and criminal evasion of tax. Picture: PA

The report, to be published this week, will argue that Scotland could start with a clean sheet to clamp down on tax avoidance and criminal evasion of tax.

The amount of tax lost through non-payment and avoidance increased last year to £35 billion.

Critics blame the complex UK tax code, which runs to more than 10,000 pages, amid reports that one in three people in the UK are paying the wrong amount of tax, and often underpaying as a result.

This week’s report by the Scottish Government-commissioned Fiscal Commission will conclude 
that while Scotland could adopt the UK tax system, this would be a “missed opportunity”.

Instead, it suggests that – if the country backs a split with the UK next year – a far simpler tax system is put in its place.

The paper is not understood to go into specifics on which taxes should be reformed. However, its lead author, Professor Sir James Mirrlees, has previously called for controversial plans to scrap VAT-free allowance on goods such as children’s clothes, and a merger of income tax and National Insurance.

He also called for a revamp of council tax and the abolition of stamp duty, saying that all such simplifications would end costly and inequitable complexity.

The report will set out principles for a new tax system, rather than the details.