Opinion Scottish Independence
Separatist issues
A Scottish ‘Yes’ vote in the forthcoming independence referendum will
“If Scotland were to become
a separate Member State, the excise duty paid in England or elsewhere in the UK would not “count” in Scotland
”
force businesses and tax collectors to re-think their control methods for tax on alcohol, tobacco and oil – products subject to high duties and fraud which currently bring in well over £40bn a year to the public purse. Things would have to change signifi cantly for business both sides of the border for the control of these so-called ‘sin taxes’ if Scotland and the UK were different EU Member States. If Scotland were to become a separate Member State, the excise duty paid in England or elsewhere in the UK would not “count” in Scotland. Instead, the goods would continue to bear UK duty whilst also having to have Scottish duty pre-paid prior to movement across the border. To prevent double taxation, there is also an onerous administrative system for duty to be reimbursed. The system would apply in reverse for goods sent from an independent Scotland to the rest of the UK. Such a system would also be heavily resource-intensive for the Revenue Authorities of both Member States, which in turn would lead to real risk of business snarl-ups and cash-fl ow jeopardy for cross-border business. Believe me, you really do not want to be involved in this administrative
66 September 2014
A ‘yes’ vote in the forthcoming Scottish independence referendum could have signifi cant ramifi cations for the logistics industry and the wider business community, says UKWA’s excise goods specialist, Alan Powell.
and fi scal nightmare.
The solution would be a “total duty suspension” scenario, meaning excise goods remain in duty-suspension if they are intended to move (or might be moved) between the two Member States. To do this, you would need to apply to HMRC to be approved to deposit or store excise goods in a third-party warehouse or, if the size of your business warrants it, set up a “bond” of your own. The total duty suspension option also requires the Scottish side of the transaction to be prepared to receive those “bonded” goods. These movements have to be controlled under the Electronic Movement and Control System (EMCS) and require movement guarantees to cover the ‘risk inherent in the movement’.
EXTRA WORK, COST, RISK Currently, large and established alcohol excise businesses will use the tax warehousing system to move alcohol within the UK and rest of the EU, but a move to an independent Scotland would lead to a dramatic increase in the number of companies using the system on both sides of the border - creating extra work, cost and risk for business of sanctions being applied if even a minor administrative error were to occur. It would also mean extra diffi culties for moving and
www.shdlogistics.com
releasing spirits under the “tax stamp” regime.
In the case of tobacco products, UK law currently only allows the duty-suspended receipt of tobacco products into an excise warehouse for subsequent export from the UK. In the event of ‘yes’ vote, one would expect to see a proliferation of “tobacco tax warehouse” applications to enable tobacco products to remain in duty-suspension for “export” between the UK and Scotland. This could be of benefi t in terms of cash-fl ow to wholesale customers of the tobacco companies, since there is no duty (or VAT on the duty) payable on the product whilst it remains in duty suspension. For Scottish Revenue, it means more compliance resources required and more revenue risk. Under EU law, excise duties have to be levied at a minimum rate by the Member States but there is no maximum rate. The duty rates would have to differ very signifi cantly between the UK and Scotland to encourage Scottish/UK cross-border booze and ciggie jaunts, but it’s a possible scenario for the ‘sin taxes’ given the soundings on health from Scotland. In such a scenario, cross-border travellers can buy as many UK duty-paid products as they want for their own consumption and deprive the Scottish Exchequer. ■
www.ukwa.org.uk
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