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Baroness Carnegy of Lour: Before the noble Baroness sits down, the noble Lord, Lord Mackie of Benshie, said--it is probably correct--that the Inland Revenue deals with these matters every day and so there is nothing to worry about. Will the noble Baroness reply to him now, or will she leave the reply for a later amendment, because it seems to me to be an important point? The Inland Revenue has ways of dealing with lorry drivers and so forth. Will she reply to that?

Baroness Ramsay of Cartvale: I was not conscious that the noble Lord, Lord Mackie of Benshie, had asked me a question.

Lord Mackie of Benshie: I did not, I was just telling the noble Baroness.

Lord Desai: Perhaps I may make a point which I believe is important to make, because these things go

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down in Hansard and have legal force. When arguing about the virtue of paying the higher rate of tax in Scotland, my noble friend said that such people have to do so because they derive benefit from public services in Scotland. That is all right as a general principle, but it is not true for individuals. I do not escape taxation if I demonstrate that I derive no benefit from public services in Scotland. One pays tax because one is a resident and one is subject to tax whether one benefits or not. That point has to be made clear. Taxation is not a give-and-take thing. One is presumed to derive benefit whether or not one derives benefit.

Lord Sanderson of Bowden: Before the Minister gives up on this subject, I am concerned about one thing. The Inland Revenue has good rules at the moment for residents as regards the UK. I do not know why we are going into so much detail about Scotland per se, as opposed to the Inland Revenue just adopting what are its existing rules about residents.

Baroness Ramsay of Cartvale: We are laying down what we think is right for the new situation in Scotland in regard to the tax powers. I make no apology for that. I do not understand why people are puzzled. We have laid down some practices that are already in use by the Inland Revenue, and also proposing new matters. We are debating the Scotland Bill and how tax variable powers will be implemented.

5.45 p.m.

Lord Sanderson of Bowden: I agree that we are looking for something that is simple, which will not cause enormous problems in implementation. However, there are perfectly good rules already laid down by the Inland Revenue in check in regard to residence and raising taxes. I wonder whether we are making this a very complicated issue in what is already a very complicated Bill.

Baroness Carnegy of Lour: The noble Baroness should take the matter seriously and answer this very important point. There are in existence rules for residence which work: why are they not being used in this case?

Baroness Ramsay of Cartvale: The noble Lord, Lord Mackie of Benshie, said that all the problems that were being raised as though they were unique between Scotland and England are being resolved all the time in Britain and in Europe, and there is no reason why we cannot resolve the issue of tax variable powers to our satisfaction. That is what we are doing in the Bill. Neither of the amendments that we are debating now do anything to help the situation; they merely confuse the matter. We are only debating the two amendments before us.

Lord Mackay of Ardbrecknish: The amendments expose the House to the folly of the Committee and the folly of the Government's decision to redefine Scottish taxpayers in a way that is different from UK taxpayers

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in laws that are already defined and operating. There is plenty of case law and many of these issues have already been resolved. The Government have decided to play a new game.

In the last half hour we have succeeded in showing that the Government have no justification for playing a new game. In trying to be helpful, the noble Lord, Lord Mackie of Benshie, set out how the matter had been dealt with already. But the point is that the Government are not using current procedures. They are trying to change the rules in certain circumstances. That is the folly of their position. We have shown, as in the previous debate, why the Government should back off from these complicated clauses and just use the current procedures.

We have established that a certain amount of confusion exists. A person who is resident in Northern Ireland, working on ferries which stay overnight in Scotland, will become a Scottish taxpayer. If that is the case, that is plain daft. I suggest that a little more thought ought to be given to the matter. We will return to the wider point, but in the last 32 minutes we have exposed the Government's clauses to be as confused as many of us have thought for some considerable time. I beg leave to withdraw the amendment.

Amendment by leave withdrawn.

[Amendment No. 282 not moved.]

Lord Lyell moved Amendment No. 283:

Leave out Clause 71 and insert the following new clause--

Scottish taxpayer: definition

(" .--(1) For the purposes of this Part, a person is a Scottish taxpayer in relation to any year of assessment if he is treated for income tax purposes as resident in the United Kingdom for that year and is ordinarily resident in Scotland.
(2) In this section, "resident" and "ordinarily resident" have the same meanings as in the Income Tax Acts.").

The noble Lord said: It is 20 years since I moved a major amendment in my name, so I hope noble Lords will assist me to keep on the straight and narrow.

We have already heard many of the arguments that I will raise in my amendment, which is grouped with Amendments Nos. 284 and 285, covering the same subject in Clause 71 "Scottish Taxpayers".

I was grateful to hear the erudite and excellent remarks made by the noble Baroness, Lady Ramsay, at Second Reading, and I look forward to hearing her again. I am delighted to see the noble and learned Lord the Lord Advocate in his place this evening because I should like to refer to his kind remarks as he wound up at Second Reading on 18th June. At column 1786 the noble and learned Lord referred to persons who are liable to pay the Scottish variable tax. The noble and learned Lord said:

    "in practice, nearly two-thirds of tax payers will pay only £145 on average, assuming a full 3p increase. The average liability will be £230. The impact of tax on individuals will therefore not be excessive in any circumstances".--[Official Report, 18/6/98; col. 1786.]
The noble and learned Lord was right, and I appreciate the tone of his remarks. The noble Lords, Lord Mackie and Lord Steel, and others in the county of Angus, will

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know that in rural areas £4 a week might make a small difference to many people like shepherds. All these matters were discussed at length and they were also discussed in the Scottish press and media before the referendum was held.

Being only an accountant, I feel a little like a tightrope walker when attempting to interpret Clause No. 71. That clause deals with Scottish taxpayers. It is logical to start with subsection (1) paragraphs (a) and (b) which define a Scottish taxpayer. Subsection (2) deals with a person who is treated for income tax purposes as resident in the United Kingdom. I shall not go into the Income Tax Act. Paragraph (a) states that he is an individual to whom subsection (3) applies. This is like filling in a passport form, but it is fairly simple. Subsection (3) states that it applies to an individual for a year of assessment if he spends at least a part of that year in Scotland, or for at least a part of the time that he spends in Scotland in that year his principal UK home is located in Scotland. Paragraph (c) concerns the aggregate with this complicated formula. Subsection (4) defines when one is and is not a Scottish taxpayer. It asks the dreaded question of every single United Kingdom taxpayer, not just Scottish taxpayers: "Where were you at midnight?" I shall be corrected if I am wrong, but it is the responsibility of every United Kingdom taxpayer to know, if he has any connection at all with Scotland, where he is at midnight on any one day. I shall not go into whether that includes being on a houseboat. I was intending to tease the noble Baroness, when talking about Scottish protection, by mentioning nuclear submarines, but I shall not do that tonight.

Subsection (4) is very clear and relates to an individual who is in the geographical area of Scotland at midnight and spends the day up to midnight and the day following there.

Subsection (5) deals with residence. I have referred to Clause 71(2) which states that,

    "an individual ... has his closest connection with Scotland during that year if, but only if, one or more of the following paragraphs applies in his case".
Clause 71(2)(b) provides the test as regards the number of days an individual spends in Scotland. That is the crux of my amendment, which is grouped with Amendments Nos. 284 and 285. This amendment is proposed by the chartered accountants of Scotland. I believe that Amendment No. 284 is proposed by the CBI and Amendment No. 285 by the legal profession.

Clause 71(2)(b) is the linchpin of my amendment. There is an anomaly. The noble Lord, Lord Steel, referred to cross-border workers in the United States. That is one scene with a possible difference. In the United States it would be classified as a federal tax. There would be many state taxes. If the noble Lord wishes, we can debate the issue another day as regards the German system. He can come to our German lessons and discuss it. Clause 71(2)(b), as to whether or not a person is a Scottish taxpayer, provides that he does not have to be resident, or to have a home, but only to be in Scotland at midnight. Those provisions apply to any United Kingdom taxpayer.

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This might give some comfort to my noble friend Lord Mackay. I have to assure him that chartered accountants who are considering the proposals in this part of the Bill, and are having to give advice to firms in the United Kingdom, are not entirely of the opinion of my noble neighbour. As other Members of the Committee will explain when they deal with their amendments, the concept in Clause 71 is totally at variance. It introduces new concepts as regards the rules of residence, a point referred to by my noble friend Lord Sanderson.

Perhaps I may refer the Committee to one example. The noble Baroness said that the measure would not affect many people. Some noble Lords may drive either in Scotland or on major trunk routes to Scotland from time to time. The A.1, the A.74 or--one perhaps familiar to the noble Lord, Lord Steel--the A.68 are trunk roads which cross the Border, and are used by large lorries. I have often seen car transporters. The headquarters of a firm which the noble Lord, Lord Mackie, will know well was 200 yards from my gates at Kinnordy in Kirriemuir. The firm moved its headquarters to Dundee. It carries the saltire on many of its trucks. The firm employs 1,000 people around the United Kingdom. Of those 1,000, 360--36 per cent. of the employees--drive those trucks. They travel the length and breadth of Great Britain. They do not go abroad and I shall therefore not go into the European aspect to which my noble friend referred.

Ten days ago the company told me that of those 360 drivers it could identify 26 drivers who would be classified straight away as Scottish taxpayers. In other words, the revenue sends communications to them in Scotland. Approximately 330 of those drivers are non-Scots and residents of the United Kingdom. They will drive those trucks around the United Kingdom and might well be in Scotland. The noble Baroness referred to the measure affecting a handful of individuals. I was advised that 70 of those drivers could be caught by the provisions. The company had no clue about Clause 71, let alone subsection (2) or (2)(b).

I hope that I am right that Clause 71(2)(b) will catch an individual whether he has a home in or is a resident of the UK, or whatever. I was advised that up to 70 of those drivers would have a substantial presence in Scotland and would be likely to be caught by Clause 71(2)(b) as Scottish taxpayers, despite the fact that the only connection they have with Scotland is that they happened to be in Scotland for perhaps two or three nights in a fortnight. If they were to spend two nights in Scotland, let us say Monday and Thursday, that is four days in Scotland as laid down in subsection (4). If they spend 60 to 80 nights in Scotland during a year, and one multiplies the figure by two, that is 160 days in the year.

As I understand the rules laid down by the Inland Revenue, one deducts from one's "residence" in the United Kingdom the time one spends outside the United Kingdom. So if those drivers take a holiday abroad, or in Scotland, they will be spending more than 50 per cent. of the year in Scotland under the provisions of Clause 71(2)(b) and subsection (4).

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I wonder whether the noble Baroness who spoke with great eloquence has taken that factor on board. I refer to only one firm which employs 1,000 people. It has given me full details. It has tachographs; and the drivers' hours have to be noted. I confirmed today with the director of human resources that the English or Welsh drivers do not sleep in a bed, but in their cab. The noble Baroness may have fun stating that that is "residence" for the purpose of the Bill.

The provisions of Clause 71(2)(b) have been eloquently laid before us and justified by the noble Baroness. The only connection those individuals have with Scotland is that they spend up to 80 nights in Scotland. I may be known as "squirrel Lyell"; I never throw anything away. When coming to the debate today, I found this document which states:

    "The decision whether or not to use the power to raise additional revenue"--
by the method that we are discussing--

    "should be the [people of Scotland's] decision.

    "This prospect of democratic control contrasts markedly with our experience the last seventeen years during which taxes rejected by Scotland have been imposed on us against our will. The classic example is of course the detested Poll Tax, devised by Michael Forsyth, and others, and introduced in Scotland a full year ahead of England and Wales. If there ever was a 'tartan tax' it was the Poll Tax--the Forsyth Tax".
Blue is the colour of my football team, but this document is The Blueprint for Scotland. I believe that those words apply to Clause 71(2)(b) which will affect lorry drivers from the United Kingdom.

At Second Reading, the noble Lord gave a helpful reply. The figures he gave are curiously adjacent to the figures foreseen by tax advisers, chartered accountants and the Law Society as the total sum of Scottish taxpayers. They have given me the authority to say that Clause 71(2)(b) will open up a can of worms. I have referred only to 360 drivers in one firm driving car transporters. What about those vehicles we see being driven up and down the trunk roads delivering food to us?

I have said that it is 20 years since I moved a major amendment. However, have the noble Baroness, the noble and learned Lord the Lord Advocate, and the noble Lord, Lord Sewel, taken Clause 71(2)(b) into account when justifying the provisions with such eloquence? I beg to move.

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