Unfair rules for isles (Allen Fraser)

The Scottish Liberal Democrats have backed a motion at their spring conference congratulating the UK government on winning a concession from the EU of a 5p reduction in fuel duty for GB Oils – sorry, I meant to say for island areas.

I was lucky enough to have a holiday in Tenerife (Canaries) in May 2011 where the price of petrol was 82p per litre and diesel 84p per litre. At home the price was £1.47 and £1.53 per litre.

I’m sure that transporting fuel the 800 miles from Spain to the Canaries can’t be that much less than GB Oils tells us it costs to ship fuel to Shetland.

Of course the real reason we have to pay such a high price is because the UK imposes the highest fuel duty in the EU at 57.95p per litre – Spain charges 29.28p per litre. You can find the EU league table where the UK tops the fuel duty league at http://www.fairfueluk.com/

One of the main reasons UK business can’t compete with Europe is because of the draconian rate of fuel duty on top of which is a high rate of 20 per cent VAT. Instead of congratulating the government on its token gesture, the Scottish Lib Dems should condemn the high rates of fuel duty – but that won’t happen because our Lib Dem MP is a member of the government.

Spain (and the EU) treats the remote Canaries much better than the UK and EU governments treat Shetland. The Canaries form an “Autonomous Community” within the Kingdom of Spain. The islands have their own government, parliament and administration, established by the Statute of Autonomy of the Canary Islands. The Canarian fiscal and economic system is different from the general Spanish one, which is in force in the major part of mainland Spain.

As a part of Spain, the Canaries are also part of the European Union. However, the islands enjoy some exceptions in the fiscal and economic area. The currency in the Canary Islands is the euro, as in Spain. Although mainland tax regulations apply in the Canaries, companies operating there are also eligible for special tax incentives (the Special Tax Regime or REF).

Key features of the REF are as follows:
•    VAT is not applied in the Canary Islands; instead there is a specific Sales Tax (IGIC) which has a general rate of five per cent. In addition to increased and reduced rates of IGIC, there is a zero tax rate for certain basic need products and services (e.g. telecommunications);
•    Exemptions from duty on capital increases;
•    The use of undistributed profits to reduce the taxable base provided that the amounts concerned are invested within three years in certain qualifying fixed assets or public stock;
•    Enhanced tax credits for various types of investment.

As well as being a REF the Canaries have a further designation from the EU which is that of Special Economic Zone (ZEC). The ZEC has been created within the fiscal and economic regime of the Canary Islands for the purpose of encouraging the economic and social development of the islands and the diversification of their manufacturing and service sectors.

Something like REF or ZEC won’t happen for Shetland, because our self-congratulatory politicians think that even a cut of 5p is a big deal, but it would be great if it could. You can read more on the Canaries ZEC here http://www.lowtax.net/lowtax/html/offon/spain/spncan.html

Allen Fraser
Shetland Geotours
Meal,
Hamnavoe,
Burra.