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Published on 6 June 2019

Scottish government consultation: Devolved Taxes – a policy framework

CIOT and LITRG have submitted a joint response to the consultation. This is informed by a survey that CIOT created, and which was aimed at members of CIOT, the Association of Taxation Technicians (ATT) and the Institute of Chartered Accountants of Scotland (ICAS), who are based in Scotland and have an interest in Scottish devolved taxes.

We broadly welcome the use of the Devolved Tax Collaborative (DTC) as an annual tax forum and agree with its stated purpose. We think it will be particularly helpful as an aid to consideration of issues at a high level and early stage, and as a way of engaging a broad range of stakeholders.

The letters T, A and X sitting on top of a pile of coins.

In their Programme for Government 2018-19, the Scottish Government committed to establishing a more strategic and structured process to engagement, legislation and delivery around the fully devolved taxes. This consultation aims to assist in fulfilling that commitment. In part, it recognises the fact that while Scotland currently only has two fully devolved taxes (Land and Buildings Transaction Tax (LBTT) and Scottish Landfill Tax (SLfT)), two more are on the horizon, in the form of Aggregates Levy and Air Departure Tax. In addition, it is a response to recommendations made by the Budget Process Review Group, which was established by the Finance and Constitution Committee of the Scottish Parliament to carry out a fundamental review of the budget process, and concerns raised by professional bodies, including the Chartered Institute of Taxation (CIOT) that the current framework does not provide a simple process for dealing with legislative changes, including care and maintenance issues that have been arising with LBTT in particular.

One concern is that holding one event annually might exclude some stakeholders, particularly if the event is held in the same location each year. It might mean that views from certain sectors or regions are less likely to be represented. This is a particular concern given the desire to attract a broad spectrum of stakeholders, many of whom do not have a primary interest in tax, but who may nevertheless offer valuable insights. Third sector organisations are, in general, stretched, and they may find it difficult to resource attendance, whether due to lack of personnel or cost. It may therefore be necessary to consider means of facilitating attendance for certain stakeholders.

In order to gain meaningful input from wider stakeholders without an expertise in tax, public awareness-raising will be essential, as it can be difficult for someone to engage meaningfully in a consultation unless they have a reasonable grasp, not only of the issue itself, but also wider contextual considerations.

When consulting on tax proposals or changes, we do not think this should be done collectively in one document. The approach should either be to vary the approach depending on the proposals involved, or to use an individual approach. An annual, certain cycle for consultations would be helpful in that stakeholders would know when the consultation exercise will occur and should be able to plan accordingly. We also think the Scottish government should make more use of stakeholder meetings during consultation periods.

We think that overall the proposed policy and legislative cycle looks sensible. It is important that there is a structured process and that the proposed policy and legislative cycle is the norm. This will help to deliver a tax regime that is fair, simple and certain, as well as avoiding unintended consequences for all stakeholders, including taxpayers and the Scottish government. We also think that having a Finance Bill as part of the policy and legislative cycle would assist in dealing with care and maintenance changes, as well as changes driven by policy development, Revenue Scotland and Tribunal decisions and UK government announcements.

We think that while there needs to be a regular, certain cycle for policy and legislation, there should also be flexibility available to the Scottish government so that it is possible to deal with urgent issues that arise outside the parameters of the normal cycle. It is important that the Scottish government can be held to account if they do not follow the standard tax policy framework, though, to ensure the flexibility is not used inappropriately. One possibility might be a requirement for a ministerial statement to explain why the process has not been followed in a particular instance.

The consultation can be found on the Scottish government website.

You can find our full response here: Devolved Taxes – a policy framework – LITRG/CIOT response

You can find the responses to the survey here: Policy survey

Joanne Walker

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