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Scotland would have to pay more than £750m to set up a tax system after independence, according to an analysis by the body representing Scottish chartered accountants.

The costs of establishing a separate revenue and customs system would run into the high hundreds of millions, the Institute of Chartered Accountants in Scotland said. It attacked the Scottish government, in a report released on Tuesday, for not identifying the cost of a separate tax system.

Ministers in Holyrood have only said such costs would be a “small” percentage of an independent Scotland’s total budget.

Icas said: “How small is small? . . . ‘Small’ might be 1 per cent, which would be around £650m, but 5 per cent would be £3.25bn.”

The institute likened the process to that which took place in New Zealand, where the country’s tax database and IT system was overhauled at a cost of about £750m.

The report said: “Changes to the tax system which are less complex than those for an independent Scotland are costing around £750m.

“The cost for an independent Scotland could be significantly greater, especially considering the scale and the complexity of the legacy systems which might be inherited from the UK. What it is really going to be, and how it is to be paid for, is a question that still needs to be answered.”

The report also took Edinburgh to task for saying Scotland would have a lower deficit after independence because it would gain control of the vast majority of North Sea oil and gas tax receipts.

Icas called into question whether this extra income would be enough to pay for the promises made by the pro-independence campaign, including free childcare for all children over the age of three by 2020.

The report said: “Having a lesser deficit than the rest of the UK is not the scenario, as oil and gas tax revenue looks unlikely, on its own, to fund the additional spending in Scotland.”

The institute also criticised Edinburgh for leaving open other questions on tax, including what personal tax rates might be and how the country might structure a special fund to invest the proceeds of North Sea oil and gas.

It said: “The lack of simple numbers in the independence referendum debate so far has seemingly not been helpful . . . The presentation of the few numbers in the white paper leaves a gap, particularly about the impact of oil and gas tax revenues on Scotland’s spending capacity.”

Icas even suggested that the country should bring in a temporary “solidarity tax”, as was seen when East and West Germany were reunited, to help pay for the one-off administration costs.

John Swinney, Scotland’s finance secretary, said: “This report fails to take account of the long-term opportunities to create a modern, efficient and cost-effective tax system in an independent Scotland.”

The UK Treasury said: “This report highlights the hidden charges that would come with setting up a tax and benefits system if Scotland voted to leave the UK.

“It also confirms what we have been saying for some time – that the Scottish government should update its over-optimistic forecasts for oil and gas revenues so they are more in line with independent forecasts and the private forecasts of John Swinney’s leaked memo.”

Copyright The Financial Times Limited 2017. All rights reserved.
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