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English Votes for English Laws Sounds simple but it isnt and the prospect of devolved taxation is set to muddy already murky waters, says the Institute forFiscalStudies.
English Votes for English Laws (EVEL) is back at the top of the political agenda after William Hague unveiled a set of options to realise the concept in December, partly in response to the Smith Commission report on further devolution of powers to the Scottish Parliament.
Discussed less often, however, are the financial implications of devolution, to both sides. These apply not just to devolution of issues clearly related to money, such as tax, but of the UK-wide effects on grant distribution under the Treasurys so-called Barnett formula of many decisions that might be taken under EVEL.
There is much muddled thinking in political circles on this issue, says David Phillips, senior research at economic research body the Institute for Fiscal Studies (IFS).
William Hague has said that as more tax is devolved, the Barnett formula becomes less important, but this is not necessarily true, Phillips says. It depends on the precise way you adjust the block grant when you devolve a tax.
This is where it all starts to get a bit brain-befuddling: it is probably safe to say that lsquo;how to adjust the block grant when you devolve a tax was not the main topic of conversation at most Christmas lunch tables this year. It is a highly technical, complex and arcane area of Treasury activity. But the basic principles of why it matters and how it is linked to wider politics, and EVEL can be understood a bit more easily.
Say, for example, you devolve to Scotland a certain tax currently raised all across the UK, of which pound;10bn was raised last year from Scotland. On devolution of that tax, it would seem fair to reduce the main public service grant the UK gives to Scotland the block grant by pound;10bn the next year.
But what happens in subsequent years, when the amount of money raised by that tax changes across the UK - for example due to changes in inflation - and what happens if these changes that affect revenue are different in each devolved area? Clearly you cannot keep just deducting pound;10bn. But how should your deduction change over time?
In fact there are a number of different ways of adjusting the changes and different ways are likely to suit different taxes.
One way favoured by the IFS is the index deduction method, whereby slightly more or less is deducted from the block grant to a devolved area depending on how revenue from that tax varies in England. This will be fairer but can lead over time to problems where local conditions are different.
Last week, the IFS published a report proposing a system of indexing that takes into account the proportions of each tax that benefit the UK as a whole, and the proportions that only affect England (IFS briefing note BN157) [http://www.ifs.org.uk/uploads/publications/bns/BN157.pdf].
But the report raises other complications.
Scottish Government policies can have knock-on effects for UK government revenues or expenditure, and vice versa, it says. The Smith Commission recommends that transfers be made between the governments to compensate for these knock-on effects. In principle this seems sensible. But in practice, implementing such a principle would be fraught with practical and political difficulties. The calculations required are inherently difficult, with much room for disagreement over methods and assumptions. This means it would be important to recognise that such compensating transfers would be practical in only a few cases otherwise the system could quickly become unworkable.
There are yet further complicating issues. What happens if the UK government decides to use part of the money raised by a devolved tax in England to fund activity from which the whole of the UK benefits, such as cutting the budget deficit?
Other issues arise if a tax is not clearly linked to an area of spending. With business rates for example, the subject of another recent IFS paper (BN155 lsquo;Business as usual? http://www.ifs.org.uk/publications/7442 ), payment back out is combined with local government funding in England, but while revenue from business rates can (and does) rise, local government funding is being cut. This cuts the connection between taxation and spending, making the Barnett issues even more complicated to sort out than they were already.
Clearly, with any devolution settlement, the precise machinations of the Barnett formula will remain vital to all parts of the economy.
Further tax devolution does not mean the Barnett formula becomes less important, says Phillips. It means the Barnett formula carries on working in the same way in the background, but with additional features if revenues go up or down.
How much the Scottish government has to spend will still largely depend on changes in Westminster to departmental budgets and the knock on effects in the Barnett formula.
Coming back to EVEL, this means so-called lsquo;English votes for English laws is a much murkier concept than many realise. If a law ostensibly governs policy just in England, or just in England and Wales, but would or might then have a knock-on effect to grant funding received by Scotland or Northern Ireland, why should MPs from those parts of the UK not at least have some kind of say in its development and ratification?
You might then have a situation where the majority of English MPs support a change in policy, but a majority of MPs from across the UK, including devolved areas, oppose it on spending grounds.
One suggestion is you could split up the financial and non-financial implications of the bills, Phillips says. This would create a situation more like in the US, where Congress routinely can and does raise funding objections to government measures.
Another interesting aspect to all this is that low-profile Treasury officials can exercise a fair amount of discretion in altering the detail of the way the Barnett formula works or is applied, from year to year.
While any major changes to the formula are agreed by consultation between all parts of the UK as part of the Chancellors annual Spending Review, because of the complexity of the issue, in practice arguments can arise well after application and continue to rumble for some time as in the case of the decision to exclude spending on the Olympic Games from the formula on the grounds they would benefit the whole of the UK.
The Smith Commission has recommended moves to make such decisions even more collaborative and consensual, but as ever the devil will be in the detail and there is a lot of detail.
The Barnett formula is a misnomer: it is more of a principle, and there is Treasury discretion about how it is changed from time to time, says Phillips. It really is as important as devolution.
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Regarding "Malloy on rail vs. highway expansion: 'All of the above" (Jan. 8, 2015), a comprehensive transportation plan must aggressively promote the Internet as a component of the mass transit system.
Widespread telecommuting can reduce traffic congestion, costly wear and tear on roads and rails, and the need to expand such infrastructure. It can minimize the disruption that any such expansion causes. However, New York State tax authorities continue to threaten Connecticut's ability to exploit the transportation benefits of the Web.
New York taxes Connecticut residents who sometimes choose to telecommute to their New York employers on 100 percent of their wages - not just the wages they earn when they work in New York, but also the wages they earn when they work from home, in Connecticut. New York taxes the Connecticut income despite the fact that Connecticut can tax it, too. The result for many commuters is double taxation on their Connecticut earnings, a potent deterrent to telecommuting.
In the last session of Congress, members of Connecticut's delegation, including Sens. Richard Blumenthal and Chris Murphy and Reps. Jim Himes, Rosa DeLauro, and Elizabeth Esty, sponsored legislation to prevent states like New York from taxing nonresidents on wages they earn when they are physically present in a different state. The measure would eliminate the significant penalty for choosing a Web-based commute.
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- Category: Taxation
- Hits: 412
Their slogan let the people vote on investing in their communities, has garnered the support of 42 Kentucky organizations along with bipartisan support in Frankfort. Who, after all, could be against city and county residents self-determination on taxation and the feasibility of locally funded public projects? Sounds good, but you cant judge a tax policy by a nifty acronym any more than you can judge a book by its cover.
Arent Kentuckians already taxed enough? According to the Tax Foundation, Kentucky is ranked as the 17th highest in local income tax collections, 18th highest for gasoline taxes and 22nd highest state for individual income tax. On the other end, we rank amongst the lowest for cigarette and property taxes, and the individual tax burden is in the middle at 25th out of the 50 states. Not outrageous, until one considers that Kentucky is not a wealthy state and faces poverty like few others.
Nearly 900,000 Kentuckians live in poverty. We are the fifth most impoverished state in the nation according to Wallstreet 24/7. Eighteen percent of the population received food stamps in 2013. Only two other states had more residents on food stamps. How will LIFT help the plight of Kentuckys poor? It wont. In fact, sales tax increases disproportionally hurt the poor.
Why not consider other policy changes without increasing taxes to free up local monies? Repealing the prevailing wage law which significantly ramps up the cost of public projects would allow local tax dollars to go further. How about cutting unnecessary positions in government and wasteful spending wherever it may be found? Theres a bill in Frankfort to cut jailers positions in counties that dont have jails. It would free up an estimated $1.4- $2 million of county funds.
Proponents of LIFT argue it is ultimately the voters who will decide. This may be true, but once a local project is proposed, those who stand much to gain will sell the project as a panacea to the community. It will likely amount to a one-sided marketing campaign leaving unorganized, less energetic and unfunded taxpayers and voters at the mercy of information provided by the groups most likely to benefit from the project. A hard lesson learned under President Obamas stimulus spending is that not all public projects end up being prudent investments.
Of course, counties and cities already have the means to fund local projects. Whether a community needs a new fire station or amphitheater, they can raise funds through local income taxes, insurance taxes, property taxes and fire dues. When the project is completed, elected officials can reduce the tax if they so choose.
The LIFT tax, designated House Bill 1 by House Speaker Greg Stumbo is a priority this legislative session. But why? The political energy spent on increasing the possibility of another tax on an already poor Kentucky would better be spent on more pressing issues. Serious political capital needs to be spent on fixing the state pension fund which is drying up quicker than a puddle in the Mojave Desert. How about tackling Kentuckys outdated tax system which analysts say needs an overhaul? Making Kentucky a more business-friendly state will attract jobs and eventually grow public funds. When this happens, communities will have the resources to build special projects that LIFT proposesâ without the new tax.
Past efforts to allow for a local vote on sales tax increases dedicated to public projects were called Local Option Sales Tax. The acronym is LOST. And thats where Kentucky might find itself if its leaders believe that instituting a new tax is more important than creating conditions that broaden the tax base which leads to real prosperity and concomitant future projects for Kentucky communities.
Richard Nelson is the executive director of the Commonwealth Policy Center, a nonpartisan public policy organization. He lives in Cadiz with his wife and children.
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LAHORE: in fiscal year 2014-25 Excise and Taxation department Punjab has collected Rs 336 million as professional tax from July 2014 till now. The amount collected is two percent less than the last fiscal year 2013-14. Punjab Government has set a target of 822.529 Million Rupees for Excise to collect in the Budget of 2014-15, whereas Excise has barely collected 41 percent of the year's target.
Professional tax is levied on persons engaged in profession, trade or employment in Punjab province. The Punjab Finance Act 1977 and the Punjab Professions and Trade Rules 1977, provide legal and regularity frame work for this tax, while Article 163 of Constitution of Pakistan provides the constitutional cover to this tax and declares profession, trade or employment a provincial levy.
While talking to Customs Today Additional Director General Excise and Taxation Department Punjab Mr. Masood ul Haq told that Excise is taking all necessary steps to achieve its revenue targets. He further told that excise has achieved many targets of levy collection according to time duration and will collect all taxes before time.
He added, Excise department has collected 10.613 Billion Rupees till December 2014 which is 10 percent more than the same period of last fiscal year. 9.618 Billion Rupees were collected till December 2013.
Now up to June 2015 Excise has a target of 24.12 Billion Rupees which is 44 percent achieved till December 2014.