Scottish government consults on devolved tax policy framework

The Scottish Government is consulting on a new approach to the planning, management and implementation of the fully devolved taxes in Scotland, with the aim of bringing greater transparency and efficiency to the process, and broader engagement with taxpayers and the accountancy profession

Scotland has been operating two fully devolved taxes, land and buildings transaction tax and Scottish landfill tax, since 2015 and the devolution of two further taxes - aggregates levy and air departure tax – is also on the horizon.

Other than the Scottish Budget, there is currently no formal process or structure in place to guide the consideration, analysis and implementation of legislative change for the devolved taxes.

The Scottish government is now planning to publish a devolved taxes policy framework setting out a policy and legislative cycle through which changes to devolved taxes legislation will follow.  In developing its framework, it has worked with the UK, Welsh, Irish and New Zealand governments.

The Scottish government said its aim is to have early and continuous consultation throughout the policy cycle, with stakeholders encouraged to participate in the formulation of tax policy and given clarity around when and how they can make representations.

The framework will also ensure tax changes are announced sufficiently in advance of when they will take effect, providing taxpayers and practitioners with certainty, and that legislation is reviewed post-implementation.

There will be identifiable points throughout the year when the Scottish government will undertake specific engagements on the fully devolved taxes.  In turn, it will create opportunities for stakeholders to make representations, providing clarity on when representations should be made so that there is appropriate time for them to be considered and assessed.

Specific proposals include reconvening annual meetings of the devolved tax collaborative, a grouping of stakeholders, which first met in advance of tax devolution.

The Scottish government will publish a tax consultation on an annual or biennial basis. Where possible, the consultation will seek views on a range of issues under consideration, rather than consulting on each on an individual basis.

It will set out the range of tax measures the Scottish government is exploring; the policy objectives of those measures; on what areas views are sought; and an assessment of the likely impact.

All fully devolved tax legislation will be subject to scrutiny from the finance and constitution committee and the Scottish Parliament.  A working group will explore options for an alternative legislative process for devolved taxes legislation, including whether there is the need for a Finance Bill.

The post-implementation review will seek to evaluate if the policy is operating as intended; if the resultant revenues and/or the benefits to wider-policy objectives were as expected; and whether the consequences were anticipated.

The framework includes provision for exceptional cases, where tax changes will be made without advance consultation. These are largely where the Scottish government needs to intervene as a result of changes made in the UK Autumn Budget, in order to protect revenues or address market distortions, and where providing advance notice could lead to forestalling.

CIOT, which commissioned research in September 2018 showing 84% of Scots thought they needed better information about how taxes are decided in Scotland, has welcomed the consultation. Alexander Garden, chair of the CIOT’s Scottish technical committee, said: ‘The increasing importance of the devolved taxes to the Scottish Budget means that the time is right to take stock of the first four years of their operation, consider how they have fared against the principles underpinning the Scottish approach to tax and ensure that the policy process is fit for purpose both now and in the future.

‘This would ideally involve examining ways in which public awareness of the devolved taxes can be improved. This can help to ensure more informed decisions by politicians and hopefully ensure better public understanding and support.

‘We look forward to working with the Scottish government, Scottish Parliament and others as part of this process.’

The consultation closes on 6 June. An analysis report will be made available in late summer, with an announcement on the new process to be made as part of the 2020-21 Scottish Budget in late 2019.

Devolved taxes: policy framework consultation is here.

Report by Pat Sweet

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