Aggregates Tax and Devolved Taxes Administration (Scotland) Bill: Ministerial statement

Opening statement for the stage 1 debate by Minister for Employment and Investment Tom Arthur.

Presiding Officer, this Bill provides for the key elements of a new devolved tax on the commercial exploitation of aggregate in Scotland. This will replace the UK Aggregates Levy when introduced.   

It reflects an all-party recommendation of the Smith Commission, and draws on the powers provided in the Scotland Act 2016. 

The Bill proposals will also support the effective and efficient collection of all devolved taxes by Revenue Scotland. 

I want to thank the Finance and Public Administration Committee for their detailed scrutiny of the Bill and their Stage 1 report.  I am pleased that the Committee support the general principles of the Bill.  

I would also like to take this opportunity to thank everyone who gave evidence during the Stage 1 process, and the many stakeholders who have supported the development of the legislation thus far.  

This Bill has been drafted with the help of significant expert feedback and has been informed by a programme of quarry visits, meetings with aggregate producers and businesses focused on the production of recycled materials. 

I am keen to maintain this positive engagement as we move forward and prepare for the future operation of a Scottish Aggregates Tax.  

In particular, we will continue the expert advisory group that was convened specifically to provide advice on this Bill. 

Before addressing the Committee’s report, I want to recognise the important contribution aggregates make to the Scottish economy, and to reflect briefly on the different types of aggregate. 

Aggregates provide materials for housing, energy infrastructure, construction, and road building – and the aggregates industry supports employment across Scotland, including in rural and remote areas.  

Most aggregates currently used in Scotland are primary aggregates – crushed rock, gravel and sand - which are produced from naturally occurring mineral deposits and used for the first time. These vital aggregates are produced in quarries the length and breadth of Scotland.   

Secondary aggregates are by-products of industrial and construction processes, and recycled aggregates are materials previously used in construction. Thanks to the industry’s ongoing innovation, the range and quality of recycled materials is continuously improving. 

To encourage the minimum necessary exploitation of primary aggregate, maximise the use of secondary and recycled aggregates and incentivise innovation and the development of alternative materials, this Bill provides for a tax on the commercial exploitation of primary aggregates in Scotland. 

This, combined with other measures, such as the Scottish Landfill Tax, will support our wider ambitions to deliver a fair, green and growing economy and more specifically our ambitions for the circular economy. 

Presiding Officer, turning now to the specifics of the Stage 1 report, concerns were raised about the lack of data on the impact of the UK Aggregates Levy and the challenge this presents for assessing behavioural impact. 

In particular, there is no disaggregated HMRC data available for the UK Aggregates Levy at a Scotland or sub- Scotland level. 

With this in mind, the approach taken to this Bill, particularly the decision to align with the UK Aggregates Levy, is pragmatic and sensible. It considers the views I have heard throughout our consultation and engagement process and the data limitations the Committee highlights. 

The Scottish Government is also working closely with Revenue Scotland and the Expert Advisory Group to consider opportunities to improve the evidence base.  

The Committee also questioned whether there was a potential tension between the desire for continuity and the effective incentivisation of recycled and secondary aggregates use. 

The approach set out in the Bill ensures that there is a price signal to encourage the use of recycled, secondary and alternative aggregates whilst ensuring stability and certainty for taxpayers. 

It also allows for the tax to evolve over time, informed by Scotland-specific data collection and increased understanding of the tax and its impacts on the aggregates industry in Scotland.  

I am also conscious that there was a strong interest in the future tax rate.  

The proposed introduction date of this tax is however two years away, and decisions on any tax rate will be set out as part of the Scottish Budget process.  

I recognise the desire for clarity on this matter and am mindful of the importance of stability and certainty for taxpayers as we introduce a new tax: we will therefore work closely with stakeholders to inform decisions on future tax rate policy.  

Separately, the Committee noted the importance of cross-border movements of aggregate. In particular, the interaction between the UK Aggregates Levy and the new Scottish tax.  

Extensive consideration, informed by stakeholder engagement, has been given to the appropriate approach to accounting for cross-border movements. The approach set out in the Bill is the most administratively straight forward for taxpayers and wider businesses.  

The Committee also reported concerns from taxpayers about the current levels of compliance with the UK Aggregates Levy regime.  

On this, our focus is on ensuring that the arrangements for the Scottish Aggregates Tax work as intended, and that there is a level playing field for all. The Bill thus includes a distinctive provision that allows for the charging of tax on those that purchase taxable aggregate from unregistered suppliers. 

The tax will also provide an opportunity to demonstrate the operational benefits of tax devolution, making best use of Revenue Scotland operational expertise. 

The second part of the Bill includes a small number of provisions that will further optimise the administration of all devolved taxes.  

I know that stakeholders have raised concerns about the lack of consultation on these provisions.  

However, the provisions have been informed by detailed engagement with Revenue Scotland and are either: 

  • minor points of clarification
  • create consistency with powers already applying in Scotland to UK taxes. 
  • or are enabling powers where a full public consultation will be conducted in advance of any secondary legislation. 

Part 2 includes two enabling powers which will allow Scottish Ministers to make regulations on how Revenue Scotland communicates with taxpayers and how they make use of automation.  

The aim of the powers is to future-proof our tax legislation and ensure that Scotland can continue to make use of modern advancements in its tax system.  

I am ever conscious of the need to safeguard taxpayers, and my response to the Stage 1 report sets out a number of ways in which taxpayers’ interests will be protected. I am sure that this will be discussed in more detail during the debate.  

Part 2 also includes provisions which will allow Revenue Scotland to set off undisputed amounts of taxpayer debits against the same taxpayer’s credits.  This provision will aid Revenue Scotland’s ability to efficiently collect taxes while not disadvantaging the taxpayer.  

Again, I am happy to discuss the safeguards which will be available to taxpayers on this matter.  

Overall, these provisions will allow us to create and maintain a modern, efficient and effective tax system, fit for a modern Scotland.  

This Bill is just one element of the Scottish Government’s ambitious programme to drive progress towards a circular economy and net zero. But it is a key element.  

The Bill delivers on a cross-party agreement to devolve further tax raising powers to the Scottish Parliament.  

The proposals are the result of extensive stakeholder engagement and I am committed to continuing this engagement as the Bill progresses through Parliament. 

I look forward to our discussion and debate this afternoon, and I ask Members to support the Bill at decision time. 

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