Framework for Tax 2021

Scotland's Framework for Tax sets out the principles and strategic objectives that underpin the Scottish Approach to Taxation, as well as our approach to decision making, engagement and how we manage and sequence tax policy and delivery.

5 Programme of work

As part of the cycle for tax policy, our programme of work will be determined in large part by our strategic priorities, commitments made by the governing party or parties, and the economic conditions of the day. Undoubtedly COVID-19 and our recovery is, and will continue to be, front and centre during this Parliament (2021-26).

This section sets out our high-level programme of work over the course of this Parliament, in line with existing commitments and the Shared Policy Programme. We will keep this under regular review and are committed to refreshing its content at the mid-point during the Parliament (2023) and to ensure we deliver on all aspects by the end of the Parliament (2026), recognising the need for flexibility to respond to unforeseen developments.

Scotland's devolved and local tax policy will play a vital role in supporting our recovery from COVID-19, providing the certainty and stability that communities, individuals and businesses need; generating sustainable revenues to fund our public services; and thus helping to build a greener, fairer and stronger economy, reinforcing our efforts to reduce inequality and child poverty.


Our local tax system plays a vital role in supporting local communities and businesses to recover in the wake of COVID-19, building on the targeted support we have provided.

To achieve this we will:

  • Communicate clear messages on tax;
  • Connect with a broad group of stakeholders;
  • Create opportunities for ongoing and proactive tax policy engagement.

We will establish a clear engagement cycle that aligns with the policy and Budget cycles set out above. We will create spaces for different ideas to emerge, to build trust and foster collective capacity to deliver tax policy. Central to this approach will be promoting a positive case for the role of tax in supporting public services in Scotland.

In pursuing this we will:

Consult, Convene and Listen: Collaborating with stakeholders on policy development, new ideas and through consultation. We will seek to understand citizens' and stakeholders' perspectives on tax, through set-piece events, calls for evidence and recurring engagements.

Engage and Inform: Maximising engagement and communication with stakeholders and the public, through events and public messaging, seeking to increase understanding of, and participation in, our approach to tax policy.

COVID-19 Recovery

As we recover from COVID-19, and in line with Scotland's economic strategy, we will seek to protect and grow the tax base in pursuit of stable revenue growth, reflecting our commitment to fiscal sustainability and to ensure the funding of our vital public services.

We will pursue a greater understanding of the drivers of devolved tax performance, as well as threats and opportunities for the tax base, and use this to inform and implement improvements, aligned with the economic cycle.

Our approach to Income Tax and LBTT is set out in our manifesto commitments, to provide a stable platform for recovery from the pandemic, with flexibility to respond, as we build a greener and more prosperous future in Scotland.

Ensuring local taxation meets our future challenges and needs

Our local tax system plays a vital role in supporting local communities and businesses to recover in the wake of COVID-19, building on the targeted support we have provided.

We are committed to reforming Council Tax to make it fairer, working with the Scottish Green Party and COSLA to oversee the development of effective deliberative engagement on sources of local government funding, including Council Tax, that will culminate in a Citizens' Assembly.

In this Parliament, we will increase the age at which people become liable for Council Tax from 18 to 22 years of age, supporting our young adults.

The Scottish Government very much recognises the overall impact of the pandemic on the tourism and hospitality sector in Scotland. We will therefore carefully review the work paused at the onset of the pandemic to develop legislation that would give Councils the discretionary power to apply an overnight visitor levy and undertake further stakeholder engagement as we consider the next steps.

Although not a tax measure, the Scottish Government and COSLA are committed to working together to develop a rules based fiscal framework to support future funding settlements for local government. This work had been delayed due to the pandemic, however Scottish Government and COSLA officials have now recommenced discussion and more substantive work will be taken forward in the first part of 2022. The development of a fiscal framework will have a direct relevance to the Scottish Government's Resource Spending.

A fiscal framework cannot be imposed by the Scottish Government, and as COSLA and the Scottish Government take this work forward, it will be important for local government to bring forward proposals that can then be explored in partnership. The development of a fiscal framework is also an important part of the ongoing work on the Local Governance Review, which considers how powers, responsibilities and resources are shared across national and local spheres of government, and with communities .

We will ensure that Scotland continues to offer a competitive Non-Domestic Rates package, which both supports businesses to recover from the pandemic and promotes a green recovery as we strive to meet our net zero emissions target. Commitments include to:

  • reduce the combined poundage rate for the largest properties to match the equivalent rate in England over the course of the Parliament;
  • maintain the Small Business Bonus Scheme for 100,000 properties for the duration of the Parliament;
  • explore levying a higher poundage on properties registered in tax havens;
  • explore tackling other known tax avoidance tactics;
  • support district and hydropower generators with relief until 2032; and
  • maintain the Business Growth Accelerator and Fresh Start reliefs for the duration of the Parliament.

Enhancing and deploying our devolved tax powers

Whilst it remains the position of the Scottish Government that devolution of the full set of economic and fiscal powers is the best way of delivering future economic prosperity for Scotland, we will continue to deliver the powers set out in the Scotland Acts 2012 and 2016.

This includes taking steps to progress the introduction of a devolved tax on the commercial exploitation of aggregates and the Air Departure Tax.

We will consider the role of Scottish Landfill tax and other fiscal incentives, such as a waste tax or other environmental taxes, in the context of the planned waste route map and the Climate Change Plan.

Consistent with our commitment to fiscal innovation, we will also explore the taxation of digital sales in Scotland, ensuring our high street retailers and town centres can recover from the effects of the pandemic and that online retailers contribute to tax revenues alongside our bricks and mortar businesses.

As part of the upcoming Fiscal Framework Review, we will call upon the UK Government to ensure the scope of the review includes the further devolution of tax and fiscal powers to Scotland; primarily full devolution of Income Tax, National Insurance Contributions and VAT. This will provide the Scottish Government with further levers to tailor taxation policy to Scotland's economic circumstances and the Scottish Government's policy objectives.

Specifically concerning VAT, it is apparent from the extensive work to establish a methodology for the assignment of VAT revenue to Scotland that intrinsic difficulties remain. We therefore propose the review should explore whether the devolution of full VAT powers would present a better alternative.

Delivering outcomes in line with Scotland's National Performance Framework

The challenges facing Scotland over the course of this Parliament are significant, and generating sustainable devolved tax revenues, along with spending and capital expenditure, act as vital fiscal levers to tackle the challenges we face.

For instance, we will consider how the tax powers that we have could help change behaviour, supporting the transition to a net zero economy. Whilst the majority of green
tax powers are reserved, we will pursue changes at every level to deliver on Scotland's climate and environmental ambitions, beginning with COP26.

We will undertake a review of LBTT's Additional Dwelling Supplement, including consideration of its impact on homes in remote and rural communities. And as we set out in the Housing to 2040 route-map, we will continue to review the role of taxation in supporting our Housing to 2040 vision for both new and existing homes and our communities.

We must also ensure that our tax powers can sustainably generate revenues that contribute to our priorities, including the delivery of a National Care Service in Scotland, reductions in inequality and child poverty and the decarbonisation of industry, transport and energy generation in Scotland (including the heating of our homes).

The Scottish Land Commission (SLC) are expected to present proposed changes to local and devolved taxation in Scotland that can support Scotland's land reform objectives. They will be considered closely and in line with our strategic objectives. We will continue to support the SLC as they explore Scotland's longer-term options for reform of land and property taxation, ensuring our land reform aims can be met, and that vacant and derelict land in Scotland is brought back in to productive use and Scotland's natural environment is protected.

Continuous improvement and building our evidence base

We will continue to enhance our understanding and delivery of devolved tax policy and apply that learning to ensure continuous improvement is embedded in everything we do, putting engagement and policy excellence at the heart of our work.

This includes working with the Scottish Parliament to re-establish the Devolved Taxes Legislation working group to progress work to ensure a robust legislative framework for tax is in place.

On 16 December 2021 we published an evaluation of Scotland's Income Tax policy in 2018-19. The evaluation has provided a unique opportunity to conduct an assessment of this scale, and its outcomes will have broader relevance to the approach to taxation in Scotland and beyond. We hope that the publication can contribute to improving public understanding of, and the level of discourse around, taxation in Scotland. In this respect, we intend to carry out a programme of engagement with stakeholder organisations and academic institutions in 2022 on the evaluation and its findings.

The Fraser of Allander Institute will publish their independent evaluation of the non-domestic rates Small Business Bonus Scheme relief (commissioned by the Scottish Government following the independent Barclay Review of Non-Domestic Rates) in early 2022.

We will ensure that reviews and consultations draw on a diverse range of perspectives and apply the learning and insights drawn from those processes.



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