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Lord Sewel: My Lords, I ask the noble Lord, Lord Rowallan, to show a degree of patience. He raised the problem of residency and lorry drivers. He merely has to wait until the next set of amendments and I shall reveal all--or nearly all.

I also urge on him a degree of caution. He is advancing the argument that one should not have a vote without paying a degree of tax. I merely ask him to cast his mind back to the poll tax. That was the argument behind that little experiment, and look how that ended in tears. So I would dissuade the noble Lord from developing that argument too far.

I freely recognise that this set of amendments is an attempt by the noble Lord, not so much to reach the Holy Grail but dare I say it, to cut through the Gordian knot of complexity surrounding the Bill's tax varying powers. The attempt is superficially attractive--one short clause to replace seven clauses. No doubt it has its attractions. However, I must advise noble Lords that the provision in Amendment No. 151 serves only to gloss over the inevitable complexities of any tax system. Many questions are left, not so much unanswered but even unasked, in the amendments tabled by the noble Lord. They are certainly not in any sense "magicked away".

The flaw in the noble Lord's proposal is that it leaves almost all of the inevitable detail that would be required if the proposed levy was to work to an order-making power. There is a place for order-making powers in tax law, but the amendment moves the balance much too far towards secondary legislation.

It is no use arguing that there would be little need for more detail. Where, for example, is there a provision defining what income should be included in the calculation of liability? Where does the amendment state how long a levy resolution will last? Where does it state what increments the levy should be set in? Where is anything said about Scottish residents who move

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during the period of assessment for the levy? What, indeed, is that period of assessment? And so on, and so on.

These are details which cannot be swept under the carpet. Nor are there details such as how a levy could possibly be based upon income net of income tax when a proper assessment of income tax liability is often not finalised until after the end of the year in which the relevant income is earned. That is a fundamental problem with the approach that the noble Lord offers us. Nor are there details as to how the Scottish parliament would assess an individual's income. It cannot be assumed that Inland Revenue records could be piggy-backed. These records are protected by strong confidentiality rules, and rightly so. The Scottish parliament might therefore be obliged to create an entirely new structure for running what would in effect be a parallel Scottish income tax system. No provision is made either about the collection of the levy or implementation of the PAYE system for this purpose or for the creation of compliance and enforcement arrangements.

I could go on, but I think I may have made the point. All those issues are covered either directly in Part IV of the Bill or elsewhere in the income tax Acts of which Clauses 69 to 76 will form a part. None is covered in what the noble Lord offers us. His clause is short only because, I am afraid, a heck of a lot is missing from it and it would have to be found in some way and put in it. I do not think this is the way out of the problem that he sees.

As I have said on many occasions, we have always worked on the basis that it would be an income tax-varying power, a constrained and limited income tax-varying power. That is understood now. Everyone is working on that basis and it would be of no service to disturb that approach and try to replace it with the kind of provision that the noble Lord wishes. So I hope that with the memory of the poll tax in his mind, he will turn away from this attraction.

Lord Rowallan: My Lords, as I indicated at the beginning of my comments, this is purely a probing amendment. I am well aware of the pieces that were missing from the legislation, but it is difficult to write a whole new raft of ideas in a short time.

I am grateful to the Minister for his detailed reply. I was fairly certain that that was the view he would take, but I thought it was worthwhile exploring the subject, if nothing else. I do not necessarily believe in it myself, but it was an option because we seem to be getting into an almighty hole over income tax and residence.

I am interested to hear the Minister say that he is about to give us a way out of it, and I look forward to it enormously. Bearing that in mind, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 69 [Power to fix basic rate for Scottish taxpayers]:

[Amendment No.152 not moved.]

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Clause 70 [Supplemental provision with respect to resolutions]:

[Amendment No. 153 not moved.]

Clause 71 [Scottish taxpayers]:

Lord Sewel moved Amendment No. 153A:


Page 32, line 19, leave out ("beginning or").

The noble Lord said: My Lords, when we addressed the issue of the definition of a Scottish taxpayer at Committee stage, I gave an undertaking to look again at the drafting of Clause 71 and to meet representatives of the Law Society of Scotland, the CBI and the Institute of Chartered Accountants in Scotland. I have been able to hold those meetings.

First, I had a useful meeting on 21st October with the three bodies concerned. We discussed in particular the proposals for basing the definition of a Scottish taxpayer on the concept of residence, the substance of an amendment earlier supported by the Law Society. It was discussed at the Committee stage and has now reappeared as Amendment No. 154. However, I think that amendment may represent an earlier stage in the thinking of the Law Society from which it has now moved on.

While there were a number of differing views around the table, there was a recognition that applying the concept of residence in this context could give rise to some serious anomalies. I think particularly of the problem of, when we use ordinary residence, what happens when someone moves during the course of the tax year. We finish with the possibility of someone being both a Scottish taxpayer and an English taxpayer for the entire tax year, which is not a condition devoutly to be wished upon many.

There was, however, general acceptance that most of the difficult cases that had been identified could be removed or substantially diminished if the Government amended the definition of what was effectively a day spent in Scotland and thus eliminated the double counting that could arise under the current provision in Clause 71(4)(a). That now provides that a person is regarded as having spent a day in Scotland only if he is in Scotland at the beginning or end of that day. It was pointed out by a number of noble Lords at that stage that the famous lorry driver could qualify as a Scottish taxpayer on the basis of spending 92 non-consecutive nights in Scotland. I offered the view that that was a difficult position to sustain, particularly if regard was had to the future development of regional government, perhaps with tax-varying powers throughout the United Kingdom. One could theoretically end up as a variable taxpayer in three different areas, which would again not be a very comfortable position in which to find oneself.

The Government discussed the matter and sought a solution. We did not seek to maintain the position in the Bill. We have listened and have tabled Amendments No.153A and 153B which we believe precisely address the problem. They have the effect of ensuring that if a person is in Scotland at midnight he will only ever clock up one day spent in Scotland. This means that, assuming a person spends the whole year in the United Kingdom, he will have to spend 183 nights in Scotland before

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qualifying as a Scottish taxpayer. We believe that that is a very simple solution to a problem which has become too complex.

The three organisations whom I met were content with the amendments on the basis that they substantially addressed their concerns about Clause 71. I hope that noble Lords will also receive them in similar fashion and agree with them. I also hope your Lordships will accept that the discussion with the professional bodies has moved us somewhat from the position proposed by Amendment No.154. That amendment would create rather than resolve anomalies. I hope that in light of what I have said the noble Lord is able to withdraw his amendment.

12.15 a.m.

Lord Selkirk of Douglas: My Lords, I thank the Minister for coming so far to meet the concerns raised by the CBI, the Law Society of Scotland and the Institute of Chartered Accountants, who are working very much at the coalface of tax law. They commend the Government for responding positively to the points that have been raised. It would be useful if the Minister could make clear that the definition of Scottish taxpayers would not be interpreted by the Inland Revenue as including travellers from England who merely wished to stay overnight in Scotland. On a related and connected subject, I thank the Minister for his letter of 27th October on the subject of charities. I am a trustee of a charity. I should be glad if the Minister could confirm that charities in Scotland would not have to pay more tax than charities in England. Furthermore, can he expose for consultation the orders that will carry this policy into effect under Clause 75(2)?

Lord Hughes of Woodside: My Lords, given the time I shall not detain the House for long. This appears to be the only amendment that provides me with an opportunity to make the following point. Some noble Lords may recall that in July there was a lengthy debate about the unified business rate. I referred to the Aberdeen Chamber of Commerce and said that not all its members were entirely in favour of the rate. I have since had a letter from Mr. Derek Marnock, the chief executive, to say that he does not recognise the views I attributed to certain members of the chamber of commerce as being the official policy of the chamber of commerce. In the 27 years I was in another place I always had extremely good relations with the chamber of commerce. I never wittingly or unwittingly misrepresent their views. I replied to Mr. Derek Marnock that, although I was satisfied that some members of the chamber of commerce were not entirely thrilled with the unified business rate--indeed, in his letter to me he goes some way towards meeting that point--I would take the earliest opportunity to make it clear that the official policy of the chamber of commerce in Aberdeen is that it has made the maintenance of the UBR one of the principal requirements for the Scottish parliament. I am happy to make it clear that that is the official view of the chamber

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of commerce in Aberdeen. If it is felt that in any way I misrepresented it, I apologise. It was not my intention to do so.


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