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Meeting of the Parliament 25 April 2013

25 Apr 2013 · S4 · Meeting of the Parliament

Item of business

Land and Buildings Transaction Tax (Scotland) Bill: Stage 1

Macintosh, Ken Lab Eastwood Watch on SPTV

The land and buildings transaction tax is, I believe, Scotland’s first new tax in 300 years. It stems from the conclusions of the Calman commission, established by Wendy Alexander and other party leaders, and it marks the first transfer of substantial fiscal power from Westminster to Holyrood under the Scotland Act 2012.

The bill makes provision for a tax on land transactions in Scotland and is scheduled to replace the UK-wide stamp duty land tax from April 2015. I make it clear from the outset that Scottish Labour broadly supports the principles of LBTT as outlined in the bill and that we believe that the bill is an example of devolution working well.

Given the political contention surrounding the whole issue of tax-raising powers and devolution, concern over rampant tax avoidance and worries over a lack of support for the housing industry, it is worth remarking on the level of cross-party political agreement that has been reached on the bill. The bill affords Scotland the opportunity to design a tax that suits our own needs, redresses some of the current taxation system’s flaws and frees the Scottish housing market from the market distortions of London and the south-east.

No one will be surprised to hear that Scottish Labour supports the principles of a progressive approach to taxation. We believe that replacing stamp duty’s tiered or so-called slab structure with LBTT’s gradual rising scale or progressive approach is a welcome change to the existing tax system. The current slab taxation approach creates disincentives and marked inequities in the level of tax paid, particularly around the tax thresholds, where a difference of £1 in a selling price can lead to an extra tax burden that is measured in thousands of pounds.

Not only will changing to a progressive scale lead—I hope—to a more equitable tax structure, it will help to eliminate the market distortions around tax thresholds and simultaneously facilitate the sale of properties that are valued at marginally above the thresholds. It should also mean that the tax applied to transactions will be more reflective of the total value of the property being sold, which it is hoped will result in a more robust and competitive Scottish property market.

It is worth commenting that, as well as our reaching political agreement, witnesses from the public, private and voluntary sectors all broadly supported the principles underpinning LBTT.

However, it is worth highlighting that ministers have yet to announce one of the most important matters of all, which is what the new tax rates will be. We know that there will be a 0 per cent band and at least two other higher bands, but it is far from clear when the cabinet secretary intends to make that information public. We are also led to expect the effect on the tax take from the change from stamp duty to LBTT to be broadly neutral, but that still leaves quite a deal of uncertainty.

The Confederation of British Industry, among others, noted that a new Scottish system should take UK tax rates into account when setting banding levels, as any substantial difference between UK stamp duty and Scottish LBTT rates could have a direct effect on Scotland’s attractiveness as a place in which to work, live or invest.

Several witnesses raised concerns—which the cabinet secretary and Mr Gibson, as convener of the committee, echoed—about the important judgment to be made when announcing the new rates. Particular sensitivity was expressed about the length of time between the announcement of the new tax and its implementation. Many recognised that that period must be short enough to prevent people from delaying or bringing forward transactions in a bid to game the system and therefore benefit from the time lag. Others suggested that that must be weighed against the need to prevent uncertainty in the market. The cabinet secretary suggested in his evidence and confirmed this afternoon that he might not announce the new banding levels even by as late as his budget of September 2014.

Of course, it could be that the cabinet secretary believes that he will be too depressed in September 2014 to make any such decision. I hope—

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Meeting of the Parliament 25 April 2013

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