Independence is one thing, but then what for tax in Scotland?

I had some interesting discussions in Scotland yesterday. One, perhaps earlier in the day than desirable for such issues to be considered, concerned the tax transition from the UK to an independent Scotland if that were ever to happen. There is, of course, a precedent. In 1922 Ireland became an independent state. Article 74 of its 1922 constitution said:

Nothing in this Constitution shall affect any liability to pay any tax or duty payable in respect of the financial year current at the date of the coming into operation of this Constitution or any preceding financial year, or in respect of any period ending on or before the last day of the said current financial year, or payable on any occasion happening within that or any preceding year, or the amount of such liability; and during the said current financial year all taxes and duties and arrears thereof shall continue to be assessed, levied and collected in like manner in all respects as immediately before this Constitution came into operation, subject to the like adjustments of the proceeds collected as were theretofore applicable; and for that purpose the Executive Council shall have the like powers and be subject to the like liabilities as the Provisional Government.

In other words, tax continued uninterrupted with the UK tax system being adopted in its entirety by the Irish Free State (as it then was) until such time as it could make amendments.

I strongly suspect that this would have to be the case in Scotland if it too were to become an independent country. But the real question is what happens then? At the risk of simplifying Irish history somewhat grossly, in the years after independence Ireland descended into a trough of intense conservatism during which time innovation was notable by its absence. Scotland could not afford to do that. We now know the success of the modern state is far too closely related to its tax system for such an outcome to be submitted and yet, as yesterday’s hearing in the Scottish parliament showed, there is not enough tax thinking going on in Scotland right now: that is why three of the four witnesses had to come from England (albeit Alex does actually have strong Scottish roots).

This then is an issue of rightful concern and one where it is vital that recourse is not made to the usual suspects, whether they be the Big 4, a major firm of lawyers, or the tax institutes. It is all too obvious that each of these would be conflicted in offering advice: first because they do not think tax is an economic and social issue and second by the interests of the large businesses that dominate their concerns. It would be a disaster for Scotland if they were to shape its taxation future. The chance that they might wish to turn Scotland into a tax haven might also be high.

As a result there is an issue for those with broader concern to address. I will be musing on it. Serious thoughts are welcome.

You can follow Richard  J Murphy on twitter at @RichardJMurphy and at his webpage Tax Research UK

featured image Tax

Why is the UK so intent on giving North Sea oil revenues away?

New analysis of the UK’s North Sea oil and gas suggests that the combination of tax giveaways by the government, and aggressive avoidance by multinationals, means that the country may actually be subsidising the extraction of its natural resources. And this at a time of continuing ‘austerity’ measures, that a UN treaty body has harshly criticised for driving poverty and inequality, undermining citizens’ human rights.

An important shift over the last two decades has been the emergence of active civil society movements in many countries focused on the natural resource revenues obtained by their governments: whether sufficient revenues are obtained, and how they are spent. Sadly, such movements have been largely absent in high-income countries – and nowhere more obviously than the UK.

The UK provided the original base for the Extractive Industries Transparency Initiative, launched by Tony Blair back in 2002. But a failure to obtain appropriate revenues for the state was seen as a problem of developing countries and corruption, rather than what it is – an issue of basic state accountability in the face of aggressive multinationals.  And so for me than a decade, the UK did not even join its own initiative, and only became a candidate country in 2014. It is currently listed as ‘implementing EITI, not yet compliant’.

A new report published today by the International Transport Workers’ Federation (ITF) sets out a series of shocking statistics on the UK’s failure to obtain an appropriate share of its own resource wealth. Among them, these stand out:

  • In 2014, UK consumers paid 6 times more tax on petrol, excluding VAT, than the North Sea oil and gas industry paid on all taxes related to production.
  • Chevron’s effective tax rate in 2014 on earnings from North Sea production was 5.4%; statutory tax rates (of various types) on oil and gas should have totalled 61-82%.
  • In 2014, 3 (Shell, BP & Total) of the top 4 North Sea producers produced more than £4.3 billion worth of oil and gas and received over £300 million in net tax refunds.

Chevron structure 2014

The ITF argue that while the oil sector has successfully lobbied for and won huge tax breaks from the UK government, the companies involved continued to pursue aggressive tax avoidance as standard practice. The Chevron report (see graphic for UK structure, click to enlarge) provides a detailed case study of tax dodging tactics which are replicated by others, particularly Nexen – on which the Times had a frontpage splash yesterday, using ITF analysis to show that the Chinese government-backed company received tax credits of £2 billion.

The ITF analysis covers 2014, when oil prices were still relatively high. Since then the oil sector as a whole has become a net tax drain on the UK budget, not including direct subsidies. On that basis, the ITF conclude that UK taxpayers are now likely to be subsidising the world’s largest oil companies to exploit the country’s natural resources.

The report, and much more, can be found at We highly recommend a visit – and if you’re in the UK, you may want to raise this with your representatives. (If you’re in Scotland in particular, you want to consider what this analysis entails for yesterday’s data showing a large, implicit deficit for an independent Scotland. Would an independent Scotland subsidise the oil and gas sector? In the absence of independence, should the UK be doing it?)

NB: This blog was first posted on the Tax Justice Network website before being posted on Tax Research UK

I happen to think the questions regarding Scotland particularly pertinent 

You can Follow Richard Murphy on Twitter at @RichardJMurphy and at his blog page Tax Research UK

featured image Balloon and money by Franklin

GERS might comply with the rules but so what when the rules are biased?

My attention was drawn yesterday to a blog by Graeme Roy of the Fraser of Allander Institute, which claims to be ‘Scotland’s leading independent economic research institute’ and is based at the University of Strathclyde. Graeme Roy, who admits he worked on preparing GERS (Government Expenditure and Revenue Scotland, which has been the subject of some discussion here of late) for seven years until 2014, write defending the criticisms I have raised of it, without ever explicitly saying so.

It may be worth starting by recalling what my first (and continuing) criticism of GERS was. I said in a blog that estimated data from the London (which I made clear was the Westminster government) was of little use in deciding the future of Scotland. In that case it’s important to note two things Roy says. They are both in this one paragraph:

In short, GERS estimates the contribution of public sector revenue raised in Scotland toward the public sector goods and services provided for the benefit of the people of Scotland. It’s important to remember that GERS does this taking Scotland as a mini-UK, and the constraints and protections that the current constitutional arrangements bring.

I could almost finish at this point. First, Scotland is not a mini-UK: it is a separate country within the UK. In that case GERS is prepared on an inappropriate basis. And independence assumes the current constitutional arrangements will change.  My claims are, therefore, correct as a matter of fact. But having entirely conceded my argument Roy goes on to defend GERS in ways which do not anyway, in my opinion, make sense, so I will continue.

My main concern is this claim:

It’s a National Statistics publication. This means that the statistics – and how they are presented – have been independently judged to be methodologically sound and produced free of political interference.

In what follows I wish to make clear that I respect what Roy has written, and the integrity of his motives in doing so, and his stated beliefs. I am quite sincere when saying that I believe he sees no problems in making a number of assertions with which I will, however take issue. Nor, I stress, is it the case that in saying these things that I am questioning the integrity of those preparing GERS. What I am saying is that they are working sincerely within a system  which , first of all, imposes political interference as a matter of fact and which is not as independent as Roy would like to claim, albeit entirely honestly.

Let me deal with the second issue first. I am afraid that I have little confidence in almost any claims of professional objectivity. I have long challenged the accountancy professions claim to be objective when it comes to standard setting and enforcement. It patently is not. In fact there’s strong evidence it does not even understand the law and instead construes it to its own advantage. Economists are no better: I always remember with amusement the claim that an economist once made to me along the lines of “Of course I am objective; I accept all the assumptions of neoclassical economics”, to which I fell about laughing, largely because the absurdity of what he’d said was clearly not apparent to him. And when it comes to government statistics the standards are set by one civil service organisation for another civil service organisation and since all such organisations will call upon the same broad pool of talent and operate in the same broad way for the same broad administrative structure, financed in the same broad way it is hardly surprising if there is a convergence of opinion on what is acceptable.  The fact that there is a peer review process does not alter this: peer review is almost always designed to reinforce the status quo. I stress I am not saying that the statistics are not prepared in accordance with a standard, but just as winners write history, it’s a fact that prevailing power elites write rules to reflect their priorities without always realising that they have done so. As a result saying GERS is acceptable because it meets the standards set by Westminster who quite clearly want Scotland to be treated as if it is part of the rest of the UK is no comfort at all. It just says that’s the standard that’s been met. It does not say if the standard is appropriate.

And this is the problem Roy faces when claiming there is no political interference in GERS. He seemingly fails to note when doing so that he has made, and noted, two massive political assumptions i.e. that Scotland is just a part of the UK when it would not have its own parliament if it was, and second that Scotland can survive on UK based data and does not need its own economic data despite the fact that it has devolved economic powers. That’s not an objective assumption. It’s actually an assumption that is, in my opinion, contemptuous of the whole idea that Scotland has the right to exercise discretion by denying it the data it needs to both decide upon appropriate actions and then appraise outcomes. This is a Westminster assumption and is implicit in the data available to prepare GERS.  However good the statisticians who prepare GERS are they can’t overcome this fact and they should, I suggest, recognise that fact, but Roy does not.  In that context the claim Roy then makes that GERS must be right because it looks remarkably like the UK as a whole is, to say the least, mildly absurd. If the data GERS produces for Scotland is an abstraction from that for the UK as a whole the only thing that would be surprising is if it did not look like the UK as a whole. Roy seems to miss this obvious point.

So how might this happen? Roy believes what he has said, I am quite sure. But he has made assumptions that I think are are political and so subjective without realising because, I suggest, they are, to use George Bernard Shaw’s definition, the assumptions of a reasonable person. Reasonable people adapt themselves to the ways of the world. Roy is doing that. So too, of course, are those who establish the standards for statistics with which GERS complies. And if you do comply with the ways of the world you rarely realise that is what you are doing precisely because complying seems so normal you do not even realise it is a choice. There is just one problem though: as Shaw also noted, unreasonable people seek to adapt the world to their ways. As a result he suggested all progress is dependent upon the existence of unreasonable people.

I am, I readily confess, unreasonable on this basis. I was told, endlessly, that I could not have and did not need country-by-country reporting. Now it is to be required worldwide.

And I was told automatic information exchange from tax havens would not happen in my lifetime. It is underway.

Time and again HMRC have said I am wrong on the tax gap, but the feeling that it may be them that is wrong is now becoming widespread.

In fact the whole tax justice agenda has been a story of being told that existing data is just fine by a power elite, whether it be politicians, governments, their agencies or professional bodies that claimed we really did not understand just how well the system was working and to leave them in peace. But we did not, and demanded new data anyway, and we now know we were right to do so.

It is my suggestion that the story in Scotland is the same. GERS was created by a Westminster power elite so suit their purpose. It cannot now meet the needs of Scotland, however much it complies with the statistical standards created by that same power elite. I don’t apologise for saying so. I reiterate: Scotland needs its own data. I don’t think it’s unreasonable to say so, but many apparently do. I don’t apologise for upsetting them.

Which leads to me to my final question in this blog (which is not aimed at statisticians, but politicians), which is why making this suggestion is so contentious? Could that be because some people do not believe Scotland is a country worthy of its own data? And could it be that they really do not think it should have the information it needs to make informed decisions? That’s perfectly possible, but if that’s what they do think then I have to ask why do they also think they have the right to suggest they should govern from Holyrood, whether Scotland is independent or not without the data that will increasingly be required to do so?

The question is a serious one. My suggestion is that those so wedded to GERS that they cannot see what their devotion implies are actually not fit to make the necessary judgements that holding office in Scotland would seem to demand. I would presume that a demand for better data for Scotland would have universal appeal amongst anyone who aspired to office in that country. That it does not suggests to me that some are quite determined that in principle Scotland should not have the information its politicians need to govern. At a quite deep level that’s worrying because it implies that not only are some opposed to independence but that they have not even embraced the idea of devolved power in which, however, they make the appearance of partaking.

Information is power. Scotland must have the information it needs. Without it, whether within or without the UK it will not have the power to shape its future. And that is no minor issue

You can follow Richard Murphy on twitter at @RichardJMurphy  or at his blog  TaxResearchUK

Innovative Jam Tomorrow







Here we go again, it’s like the last week of IndyRef all over again. The UK Prime Minister has suddenly realised there is life outside the Home Counties and is coming north to Scotland to offer “new” powers.

The thing is unlike the Super-Dooper “closest thing to federalisation” Vow that Gordon Brown promised, “signed” by Cameron, Milliband and Clegg, these are temporary powers only.

Hmm, what to think, what to think?

Let’s look back shall we?

The Vow, emblazoned on the front page of the Record on the 16th September 2014.


I’m not going through it step by step because that’s been done comprehensively by Wings and even the Guardian has called it “creative.”

However the last thing I needed to see on the 19th September 2014 was Cameron doing his EVEL speech, but he did. There’s nothing like being magnanimous in victory and as a Tory the temptation to twist the knife was obviously too much. That was the final straw that got me joining the SNP.

Then of course Scotland got the Smith Commission  where Labour screwed us over as hard as it could. Then they wonder why they are polling at 14%.


Of course the Labour party thinks we have the long-term memory of a goldfish which is why the Vow’s author keeps being resurrected for yet another intervention to promise further devolution.How can you be have more devolution if we already have the closest thing to federalisation?


It’s weird how these things are being promised again and yet we haven’t even started a referendum campaign. Panicked much?

I get the feeling Theresa May has realised her already weak position re Europe is crumbling further. It’s not going to be so easy to bargain away Scotland’s waters and fish to save the City when the whole world knows it might not be hers to offer. If nothing else Nicola has made sure that Scotland is noticed during these negotiations.

It’s not a good week for Theresa, Scotland is kicking up a fuss, Northern Ireland looks like it’s heading for an impasse which could mean direct rule from London – cue frantic googling of “Northern Irish politics” at Whitehall. All it needs now is Wales and poor forgotten Gibraltar (who voted 96% Remain) to kick off and I think there would be a collective melt-down.

By the way Wales & Gibraltar – you’ll get NOTHING if you don’t make a fuss. Westminster tends to view the other nations more as recalcitrant children than equal partners so sometimes it’s best to act up to get noticed.

The Tory’s “precious union” is falling apart and they are the main ones to blame, if it weren’t for Cameron’ hubris on the 19th and May’s high-handedness since becoming PM things may have been different. There is only one government in this united kingdom that produced a Brexit plan and it wasn’t the one in London. They dismissed the Scottish proposals on the day it was published.

Even if May did offer federalisation – something that there is no demand for in England – I wouldn’t believe her. And if you do well there’s 3 bridges on the way to Fife I’d like to offer you at bargain prices.

Why have some temporary powers when you can have them all permanently?

You can Follow Simone Charlesworth on twitter at @cee4cat  and at mewsingoutloud.wordpress