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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

Mason, John SNP Glasgow Shettleston Watch on SPTV

That question is not quite on subject. Given that Calman proposed a system of block grant reduction that would have damaged Scotland, I have to say that I am not a fan.

I return to the tax itself. How we implement it will set a precedent for future taxes. The cabinet secretary referred to the principles of getting it right at this stage. I am very comfortable with the four principles that he mentioned when he quoted Adam Smith: certainty, taxpayer convenience, efficiency and proportionality in relation to ability to pay.

We spent a lot of time looking at reliefs and it was interesting that some of the same people who asked for simplification of the tax also seemed to ask for more and more reliefs. In fact, some of the witness who appeared did not really want to pay any tax at all. I would like to spend a moment on that point.

The suggestion is that we must be competitive and so we must lower all taxes, but that is far too simplistic a view. Tax is surely one factor when companies come to make decisions about location, but an educated workforce is another, and we cannot have an educated workforce if we do not have taxation to fund schools, colleges and so on. Tax is inherently a good thing; it is how we fund public services, but of course we accept that it has to be at a reasonable level.

I will comment briefly on some of the reliefs that we discussed. On sub-sale relief, there was initially quite a lot of confusion among members of the committee and some of the witnesses about funding mechanisms. The example that was given of a farm that is bought and then split among three neighbouring farmers seemed to be a good one.

Zero-carbon homes relief has not worked under SDLT. We took evidence from a number of witnesses who were enthusiastic about it, but it seems to me that such a relief under LBTT would be a very blunt instrument to use to achieve what is a good aim.

On charities, we are looking for a practical solution. It is clear that OSCR has set the bar for qualifying as a charity very high, and we do not want to compromise that by allowing any charity anywhere to count as a charity here.

We discussed tax avoidance at length. The Scottish Parliament information centre briefing on the bill says:

“Tax avoidance is distinct from tax evasion in that avoidance exploits loopholes in the law, while evasion entails illegal activity.”

It has traditionally been held that avoidance includes moral avoidance—an example of which is people claiming their tax allowance—and immoral avoidance, which involves going against the spirit of the legislation. It seems that the more reliefs there are, the more doors there are for avoidance and the more avoidance there is likely to be. I know that that will be dealt with in the proposed tax management bill, which will include a general anti-avoidance rule.

We spent less time on exemptions. In general, it is assumed that the exemptions will be much as they are at present. I have some questions about exemption on death, as it could maintain the gap between rich and poor by allowing wealth to stay in richer families. However, I take the point that inheritance tax is intended to address that.

The issue of rates and when they should be announced came up. In paragraph 10 of its report, the committee welcomed the progressive structure that is being adopted. It has been said a number of times that some people would like the rates to be announced sooner rather than later, but how can the cabinet secretary make future budget announcements so far ahead? That would tie his hands. We do not know what house prices will be like or what the situation will be in the wider economy, let alone what will happen with the block grant and the related adjustments. It has been indicated that LBTT will be broadly revenue neutral, which I guess gives a pretty strong indication of what level the rates are likely to be set at.

The relationship with HMRC is crucial for all three taxes. So far, it seems that if we make changes that affect Scotland, we must pay the bill, but if Westminster makes such changes, we still have to pay the bill. I do not think that that was the original intention. I am somewhat suspicious of HMRC, but I hope that I will be proved wrong.

I am more than happy to support the bill and the tax that it will introduce. I am especially happy that it marks the first step in the next stage of our journey as a country.

15:32

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Meeting of the Parliament 25 April 2013

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