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Fiscal Responsibility

The Scottish approach to the devolved taxes

The Deputy First Minister in his previous role of Cabinet Secretary for Finance, Employment and Sustainable Growth originally set out the Scottish Government's vision for tax in Scotland in his statement to the Scottish Parliament of 7 June 2012.

In his statement he confirmed that the Scottish Government’s approach to tax will be fit for the 21st century, but embedded in Adam Smith’s four key maxims. These are:

  • Proportionate to ability to pay
  • Certainty for the taxpayer
  • Convenience/ease of payment
  • Efficiency

In addition, the Scottish approach to tax will support the Government’s Purpose of achieving sustainable economic growth, and be tailored for Scotland, using Scots laws.

The Scottish Government has introduced replacement taxes on disposals to landfill and on land and property transactions and took the opportunity to ensure that these replacement taxes were appropriate for Scotland.

Ther Scottish Government has also established in statute a Scottish tax administration function, Revenue Scotland, which is  responsible for the administration and collection of the devolved taxes, at arm’s length from Ministers. 

Revenue Scotland is working with Registers of Scotland to assure collection and compliance of the Land and Buildings Transaction Tax and with the Scottish Environment Protection Agency on Scottish Landfill Tax.

Scottish Rate of Income Tax

The Scotland Act 2012 provides for the Calman Commission’s recommendations in relation to Income Tax.  The Scottish Rate of Income Tax (SRIT) will take effect from 6 April 2016, while the Scottish Parliament will have the power to set the Scottish Rate of Income tax HMRC will continue to be responsible for the collection and management of Income Tax.  As such Income tax will remain part of the existing UK income tax system and is not a devolved tax.

A Memorandum of Understanding has been agreed between the Scottish Government and HMRC to aid this process.  The Scottish Government has also been working closely with the Department of Work and Pensions (DWP) to ensure that their systems are able to cope with the introduction of SRIT.  An agreement sets out how Scottish Government and DWP will work together on SRIT.

The Scotland Act 2016 provides the Scottish Parliament with power to set the rates and band thresholds that will apply to all non-savings non-dividend income tax paid by Scottish taxpayers. Scottish Parliament set the rates and band thresholds (excluding the personal allowance) for the first time for tax year 2017/18.   The Cabinet Secretary for Finance and the Constitution has set put his 2017/18 proposals for Income Tax in his draft budget on 15 December 2016. 

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