Devolved tax powers for Wales shows "Scottish experience" must be a positive one, says expert

However Alan Cook of Pinsent Masons, the law firm behind Out-Law.com, said that it would likely be several years before Wales could implement its own replacements for landfill tax and stamp duty land tax (SDLT), as announced by Prime Minister David Cameron last week on a visit to Cardiff Bay.

"Having been closely involved in the progress on Land and Buildings Transaction Tax (LBTT), which will replace SDLT in Scotland, and the distinctive approach which the Scottish Government has been able to take in utilising the new tax frameworks to promote its own policies, it will be very interest to see how Wales takes on the same task," said Cook. "What's clear from the Scottish experience is that a great deal of work lies ahead to make this happen."

"The proposals are part of a longer trend which has seen both a broadening of the Welsh Government's role and powers and also the devolution of those taxes to Scotland as well. In Scotland, the devolution of SDLT and landfill tax powers goes live in April 2015 and, for it also now to be proposed for Wales, the Scottish experience must be attracting overall positive views for its role within the overall devolution settlement," he said.

The Silk Commission on Devolution in Wales was commissioned by the then Welsh Secretary, Cheryl Gillian, in October 2011. It published its first report, looking at fiscal powers, in November 2012.

The UK Government will respond to all 33 recommendations of that report later this year, but has accepted the Commission's recommendations to extend existing borrowing powers and devolve other tax and borrowing powers to Wales. Full details of the changes will be published shortly, but any necessary legislation will be passed within the lifetime of the current UK Parliament.

Setting out the changes, Cameron said that Wales would be allowed to use its existing, limited borrowing powers to fund badly-needed upgrades to the M4 in South Wales before fuller borrowing and tax-raising powers become available. Devolved landfill tax and SDLT would then give the Welsh Government an independent funding stream to pay back its borrowing. In addition, a referendum will take place so that the people of Wales can decide whether some of their income tax should be devolved to the Welsh Government, as is the case in Scotland.

Jane Hutt, the Welsh Finance Minister, said that the announcement was "excellent news" for Wales and "a significant milestone in our story of devolution".

"It gives the National Assembly and the Welsh Government new responsibilities and significant opportunities to boost jobs and support the Welsh economy," she said. "These changes mean that, in the next few years, Wales will be in a position to tackle the improvements required for the M4, and to shape its own taxes, including the much-needed reform of SDLT."

Tax expert John Christian of Pinsent Masons said once SDLT was devolved to Wales, there could be considerable differences between the existing tax and its replacement. The Scottish Government has proposed a progressive tax structure, similar to the current income tax system, for LBTT. Slices of the transaction price will be taxed at increasing percentages once the new system is in force, unlike SDLT which operates a 'slab' system of taxation where the amount of the underlying transaction determines a single rate of tax which is applied to the whole amount.

"The experience of LBTT has been that the scope of the devolved tax in Wales may not necessarily mirror the current SDLT," he said. "Investors and developers entering into transactions in relation to assets in Wales and which will complete in a few years' time should consider how any additional costs resulting from the introduction of a devolved tax, coming into effect by completion, should be borne between them."