Publication - Research and analysis

Scottish Income Tax: 2018-19 policy evaluation

A policy evaluation of Scottish Income Tax in 2018-19

Scottish Income Tax: 2018-19 policy evaluation
4. Purpose and scope of the evaluation

4. Purpose and scope of the evaluation

Scotland's first Framework for Tax[8], which has been published at the same time as this evaluation, builds on the already established Scottish approach to taxation. It sets out the principles, strategic objectives and approach to decision making, engagement and how we manage and sequence tax policy through the fiscal cycle. The Framework provides a foundation for the design and delivery of tax policies that support our National Outcomes[9] and embodies our ambition for excellence in tax policy and delivery – including embedding evaluation as part of the routine cycle of tax policy making.

The purpose of any policy evaluation is to measure whether: a policy has been implemented as intended; anticipated outcomes have been achieved; the benefits of implementing the policy outweigh the associated costs.

This evaluation assesses the impact of the Scottish Government's 2018-19 Income Tax policy, including the departure from the tax bands used in the rest of the UK in 2017-18, against the intended outcomes defined by the four tests set out in the original discussion paper 'The role of Income Tax in Scotland's budget'[10]. These outcomes were:

  • Revenue test – any Income Tax changes should raise additional revenue, over and above the current policy, to help protect public services in Scotland and support the social contract;
  • Progressivity test – any changes to the Income Tax system should increase the progressivity of the tax system and reduce income inequality;
  • Protecting lower earners test – at a time when living costs are also rising, taxpayers in lower income brackets should not pay more tax;
  • Economic growth test changes in Income Tax policy, and the accompanying change in public spending, must support the economy.

The evaluation also assesses operational and administrative impacts of the policy changes on taxpayers, businesses and payroll software providers.

Overall, the aims of the evaluation are to:

  • understand the extent to which the policy achieved its intended outcomes, including how much revenue was raised in practice;
  • deepen the evidence around the performance of the tax base in Scotland and the behavioural risks associated with the divergence of Scotland's tax system relative to the rUK's;
  • identify lessons that can be drawn upon to inform Scottish Government fiscal and economic policy decisions, and to support growth and sustainability of Income Tax revenues; and
  • to better understand the impact of policy changes on HMRC, taxpayers, businesses and payroll software providers.

We did not test public attitudes towards, and knowledge of, the Scottish Income Tax system as part of this evaluation. However, the Scottish Government does gather evidence on public attitudes to tax, including via the Scottish Social Attitudes Survey.