Warning over avoidance in new Welsh tax regime
MONMOUTH AM Nick Ramsay has warned increased tax avoidance is a real danger if Wales gains control of income tax.
The Welsh Assembly has the option to call a referendum on whether income tax-varying powers should be devolved from Westminster.
Under the Wales Act 2014, the Assembly will also gain control of stamp duty and landfill tax in 2018.
Speaking to the Argus Mr Ramsay said: “There’s a lot of work to be done ahead of 2018 and needless to say the timescale is very tight. I think the Welsh Government is waking up to the enormity of the task before them pretty late!”
Explaining what he sees as the potential for tax avoidance, he said: “It’s mainly a danger associated with “moveable taxes” such as income tax. The current proposal relating to income tax (subject to a referendum) has abandoned the safeguard of the “lockstep” and would allow the Welsh Government to raise the higher rates of tax to a greater extent than if the basic and higher rates had been “locked” together.
“Higher rate taxpayers tend to be more mobile and most likely to re-register their addresses across the border in England (a Welsh taxpayer will be defined as someone with an address in Wales) in order to avoid the tax. This is more of an issue in Wales than Scotland because a large proportion of the population lives within 25 miles of the border (in Scotland most people live in the central belt of Edinburgh-Glasgow, some distance from the border).
“If we lose higher rate taxpayers, the remaining taxpayers will have to shoulder more of the burden and a spiral of decline could set in with ever-increasing tax rates required to get more revenue from fewer taxpayers. There is also the issue of the lack of experience amongst staff in the new Wales Revenue Office, currently being developed, who will be charged with looking at taxation issues/problems.”
But a Welsh Government spokesman said: “As we prepare for the devolution of tax powers to Wales, we are working to put in place robust measures to deter tax evasion and avoidance. Our recent consultation on tax management and collection, which closed in December, sought views on these issue and we will be publishing responses shortly.
“It is worth noting that while the Wales Act includes provisions for partly devolving income tax to Wales, this would only be after a referendum. We have been absolutely clear – we need a fairer funding settlement before we can look seriously at income tax devolution for Wales.”
