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Are you for or against more tax powers for the Scottish Parliament?
For many businesses, the answer is: er, we dunno, but be sure that we'll complain like hell if it turns out that it hurts us.

For those businesses that have taken a look, one key to answering the question is whether or not the Scottish Parliament will use enhanced income tax varying to raise or lower taxes.

That takes guesswork about the future direction of Scottish political decision-making. They like the sound of falling taxes, as you might expect. Rising taxes: rather less so.

The question ties into the proposed tax on large retailers. The plan, in John Swinney's draft budget, is justified on the basis that times are exceptionally tight, the supermarkets can pony up £30m while hardly noticing, and it "levels the playing field" with hard-pressed smaller retailers.

Whether that's true, fair or even legal, there's a bigger point of interest to all businesses - that in the absence of other significant tax-varying powers, the Scottish government is using the limited powers it has to increase the tax rate and take on large corporations.

What signal does that send? What does that tell you about the claims that corporation tax would be slashed, Irish-style, if only Holyrood were given the opportunity?

Then again, the other way of answering the question is the SNP's one, raising concerns about the general level of spending in Scotland, and that the proposed changes may merely be cover for the Treasury slashing the block grant for funding of public services in Scotland.

Accounting allies

Try digging deeper into the tax powers proposed by the UK government. Today sees a hearing of the Scotland Bill Committee at Holyrood, trying to do just that.

There's some thoughtful evidence before it from accountancy organisations. The most striking written evidence comes from the Institute of Chartered Accountants in England and Wales (ICAEW).

It's interested in the proposals because separate taxation of Scottish income will have to be considered by companies that employ on both sides of the border.

But it goes further than that, to argue that the powers being proposed don't go far enough. English and Welsh accountants are unlikely allies for those fighting to get fuller fiscal autonomy, but their institute offers one of the more colourful illustrations of the case against the currently proposed new powers

With no powers to vary the tax base, allowances, tax bands, corporation tax or national insurance: "This could be likened to Scotland being given its own car, receiving a brake and accelerator but no steering wheel".

The Institute of Chartered Accountants in Scotland (ICAS) has a more detailed approach, and it ought to give businesses food for accounting thought.

Cross-border confusion

One question is how much this is going to cost businesses. It is claimed most have software that could be adjusted to take account of a different tax rate for Scottish employees. But that claim has not been tested, least of all with the complications of tax relief on pension contributions or gift aid, which could be offered at different rates under different tax regimes.

The Federation of Small Businesses skirts a long way round anything as political as an opinion of the wisdom of what's proposed, requesting only that the new tax system should have "no or minimal time costs for Scotland's small businesses". It could be accused of wishful thinking.

The cost of all this partly depends on how easy it would be to set up a separate register of Scottish taxpayers. ICAS says that, if the system is not simplified, the upper estimate of a £150m cost can be expected. The optimistic price is £45m. And then it needs kept up to date.

Simplifying the register requires a clear definition. So how do you qualify as a Scottish taxpayer? What if you live in England but work in Scotland, or vice versa? What if you work part of the week or year in one country, and the rest elsewhere.

An example offered by ICAS is of someone who spends 101 days in Scotland, 99 in Scotland and 165 overseas. That wouldn't be surprising in the oil and gas sector, for instance. Under current plans, that person would pay the Scottish tax rate, despite spending most time elsewhere.

How do you check up on where people are working? And who is responsible? Employer or employee, or both? And ICAS asks: why won't HM Revenue and Customs consider the possibility of splitting the fiscal year so that people can pay different rates for different periods of work?

Scottish sleepovers

The way things look now, someone living in England but working day shifts in Scotland would pay English tax because they sleep in England. But someone living in England (say, Berwick-upon-Tweed) and working nightshifts in Scotland (Torness power station?) would be spending the nights in Scotland, so would therefore be liable to Scottish tax.

If elements of this seem unfair or arbitrary, then ICAS warns the acceptability of a tax is "a very fragile principle".

What then of employers who want to locate workers in higher tax regimes? How do you persuade your employee to re-locate? Experience in other jurisdictions, such as the US, suggests that employers take the hit by adjusting pay so that employees are no worse off if they move across boundaries.

And what of those on low income? Students for instance, whose residency and earnings can be very complex but not all that substantial.

ICAS points out that low income does not mean simple tax affairs. It also means less ability to pay tax or to buy advice.

And with the UK government introducing systems that will tie earnings to welfare payments, in order to "make work pay" by tapering off the poverty trap, the complexity of working through a UK-wide welfare system, with differential tax rates, will make things more complex still.

Puzzled As You Earn

It should not be beyond the wit of Her Majesty's tax man and revenue woman to figure this out. Britain is not the first country to have different tax systems in one fiscal jurisdiction.

But it does start from a position that makes it particularly difficult, with income tax deductions overwhelmingly sourced from employers' payrolls.

That makes it all the more important that employers get involved in the discussion before the legislation sets the changes in statutory stone.

If that's you, I'm told the Scotland Bill Committee is eagerly listening.