The first fully devolved taxes of Land and Buildings Transaction Tax (LBTT) and Scottish Landfill Tax (SLfT) have been operational in Scotland for four years, as has Revenue Scotland, the independent tax authority responsible for the collection and management of Scotland's fully devolved taxes. In addition, the Scottish Parliament has the power to create new Scottish-specific taxes, and introduce taxes on the carriage of passengers by air and on the commercial exploitation of aggregate.
The fully devolved taxes operate in a dynamic landscape and there are a number of factors which drive the need to consider changes, including:
- new policy development to support industry, economic growth or behavioural change;
- new measures introduced at a UK level, sometimes at short notice; and
- the need for technical changes to aid the operation of the taxes.
As a result, in the first four years of operation a number of changes have been made to the legislation for both LBTT and SLfT. Currently, there is no formal process for such changes to be considered, analysed or implemented. As such, the Scottish Government considered this to be the appropriate time to consult on a Devolved Taxes Policy Framework. The Framework will be designed not only to help us better manage our existing taxes, but to lay important foundations for a clearer approach to tax policy-making that can also apply to further tax powers in the years to come.
As part of developing a Devolved Taxes Policy Framework, the consultation invited responses on an approach to the engagement, consultation and provision of information for the devolved taxes and a policy and legislative cycle through which changes to the fully devolved taxes would follow.
This report presents an overview of the responses to the consultation and sets out the Scottish Government's next steps. We would like to thank all respondents for their contributions. Where granted permission, responses have been published in full on the Scottish Government Consultation Hub website.
We held four events in Glasgow, Aberdeen, Edinburgh and Inverness to encourage participation in the consultation. The events provided attendees with the opportunity to find out further information about the consultation from officials, to learn more about the devolved taxes and how tax powers have been used since 2015, and to provide feedback to help shape a new approach to the fully devolved taxes.
The events were led by the Scottish Government, with contributions from Revenue Scotland, the Institute of Chartered Accountants of Scotland (ICAS) and the Chartered Institute of Taxation (CIOT). The events were attended by a broad range of stakeholders, including representatives from the legal and tax professions, local government, business and academia. The Inverness event also provided an opportunity to hear from the Minister for Public Finance and Digital Economy, Kate Forbes MSP, on her views of the current tax landscape in Scotland.
There has been positive feedback provided about these events, with attendees appreciating the opportunity to discuss the consultation and a wider-range of tax matters. This is a forum which the Scottish Government intends to continue to utilise when consulting on devolved taxation.
The feedback gathered at these events is included in the analysis of consultation responses in this report.
2.2 Working Group on Devolved Taxes Legislation
Alongside this consultation, a Working Group made up of officials from the Scottish Government, Scottish Parliament, Revenue Scotland, the Scottish Fiscal Commission, and representatives from stakeholder organisations such as CIOT, ICAS, the Law Society of Scotland (LSoS), the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Stamp Taxes Practitioners Group has been convened. This Group was established to take forward two recommendations made by the Budget Process Review Group (BPRG) in its Final Report:
- Recommendation 50: The Group recommends that further work is undertaken by the Finance and Constitution Committee in consultation with the Scottish Government, Revenue Scotland and others to explore options for alternative legislative processes for devolved taxes legislation, particularly where tax measures need to be introduced quickly or where minor amendments are needed to existing primary legislation.
- Recommendation 51: The Group recommends that the Scottish Government in consultation with the Finance and Constitution Committee examines the need for a Finance Bill and brings forward any recommendations by the end of the current Parliament.
The outcome of this work will inform the timings of the phases in the future policy and legislative cycle, which will be embedded within the Devolved Taxes Policy Framework.
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