The National:

I have spent much of the last few days talking to journalists about the G7 group of nations agreement to tackle international tax abuse, agreed by UK Chancellor of the Exchequer Rishi Sunak and his counterparts in the other largest economies in the world last weekend. For those interested in this issue I've done a podcast with Common Weal which provides a lot of background information.

What I can, however, hear people saying is why mention this in a column for The National when the deal was all about international corporation tax, and Scotland does not even have control of its domestic corporation tax, which is not as yet a devolved tax? The answer to that is simple. What I suggest is that, like so many other issues, this is one where all those with an interest in Scotland being independent must have an opinion now, because this is going to matter once there is a border with the rest of the UK. Let me explain.

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The whole problem with international corporation tax is in deciding what part of the profits of a multinational corporation should be allocated to which of the countries in which it operates to ensure that the right amount of tax is paid in the right place, at the right rate and at the right time. This is a problem that has not being properly resolved for nearly a century, despite vast amounts of effort having been expended in trying to find a solution.

There is a good reason why this problem has not been resolved. That reason is that whilst we tend to think of large multinational companies as being single organisations - that is not true. They are often made up of many hundreds, if not thousands, of separate companies that can be spread right around the globe. Each of those separate companies is taxed in the country where it is, and if the global parent company that we all think of as being the company with the name that we know can manage to record more of its income than it really should in countries with low tax rates then it very obviously avoids higher amounts of tax in the places where it is really due. That’s what the G7 deal is all about.

The details of that new agreement do not really matter here. What does matter is that when there is a border between Scotland and England there will be very many companies who will be trading on both sides of it. Many of them will then choose to have separate Scottish and English companies, but with both under the control of one single parent company. They will be multinational corporations as a result. If, as I would hope, Scotland decides to have a sensible corporation tax policy charging that tax at rates higher than personal income tax rates, which is not what the UK has done for some time, then it is quite likely that there would then be a strong incentive for profits to be shifted from Scotland into England to avoid Scottish tax liabilities.

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As we all know, Scotland will need every penny of tax revenue it can get when it is independent, so protecting the country from tax abuse is going to be important. The deal the G7 is talking about will only apply to the largest 100 companies in the world. However, the principles could be used anywhere and what I am suggesting is that Scotland needs to think seriously about how it would establish proper rules for apportioning income between Scotland and the rest of the UK when it becomes independent, and whether a minimum corporation tax rate would also be a good idea. I suggest that both will be. In that case both these issues need to be considered now, and most especially during the transition to an independent Scotland.

Scotland will not want to be taken for a ride by English tax avoiders once independence happens and it's time to think about how to prevent that. The G7 deal provides a way to address this problem. Scottish politicians need to take the issue on board.