Chamber
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
This is not the first time I have taken part in a stage 1 debate in which there has been very little to say that has not been said already by the time I have stood up to speak. However, the truth is that, having listened to the often highly technical and complex evidence that an array of witnesses provided, and having read the detailed and informative written submissions to the Finance Committee, we can do no more than conclude that the land and buildings transaction tax is a welcome addition to the powers that are available to the Scottish Government to make decisions here in Scotland that will better reflect the circumstances that exist in relation to property markets in this part of Britain.
Little can be found to criticise in the detail of the bill. The concerns that were raised were more to do with issues such as implementation of the tax within the overall taxation regime across the UK. As others have said, major challenges will now be faced when agreement on block grant adjustments has to be reached between the different legislative jurisdictions.
However, the structure of LBTT is not the subject of any great concern. Indeed, more than one voice was heard to say how welcome it was that the Scotland Act 2012 had provided the opportunity to replace stamp duty land tax, with all its inherent flaws. As has been said, among the most welcome aspects of LBTT is the removal of the slab structure and its replacement with a progressive structure. Witnesses were highly supportive of that approach. No organisation was more supportive of it than the Council of Mortgage Lenders Scotland, which rightly identified that it is inevitable that there would be winners and losers in any new system but preferred to look at the positive side. It highlighted the fact that
“a progressive system would be more equitable and overcome some of the inefficiencies created by the slab system.”
However, there was some concern that there could be a disproportionate effect on high-value transactions that are liable to the top rate of LBTT. The CMLS was joined by the Confederation of British Industry Scotland in identifying that concern, but I am less concerned about that aspect of LBTT, as the Scottish Government will continue to ensure that people in higher-cost houses get a nice wee discount on their properties through the council tax freeze, which gives most to those with the deepest pockets and the biggest homes. However, the CBI is right to argue that, when setting the rates for higher-valued domestic properties, the Scottish Government would need to take cognisance of rates that apply elsewhere in the United Kingdom.
Most concern arises—with some justification—regarding the uncertainty that may emerge around LBTT rates in the lead-up to the introduction of the tax, especially in relation to commercial property, because that may discourage investment in the Scottish market. Although Adam Smith would perhaps be very proud of the cabinet secretary’s adherence to the laissez faire free-market policies that he laid down, he would not be very keen to endorse the cabinet secretary’s position with regard to the uncertainly around taxation. I have read and re-read all the evidence that was made available to the committee, and I cannot find anyone, other than the cabinet secretary himself, who gave evidence that ran counter to the view that such uncertainty might be a problem. For us to conclude that there was a range of views on the subject stretches credulity to the limit. Any statistical analysis of the evidence that was brought before the committee could lead us only to the view that the cabinet secretary is an outlier when it comes to where the weight of evidence lies.
The Law Society of Scotland, while commenting that residential rates would not be quite so important, expressed concern that a forward timescale was important for commercial property. In general, witnesses were very clear regarding their view that the absence of any indication of likely future rates of LBTT creates an additional layer of uncertainty. Most important is the view that was posited by the Institute of Chartered Accountants of Scotland, which argued that the lack of clarity even on provisional figures for tax rates or bands goes against the principle of certainty in taxation.
Given the concerns that have been raised over the slump in construction, which emerged again in this morning’s gross domestic product figures, it is worrying that the Scottish Building Federation conveyed a message to the committee that, in relation to commercial rates, it would prefer a minimum of 12 months between the publication and the impact and that, if we could get towards 18 months, that would be even more preferable for the federation. Homes for Scotland and the Scottish Property Federation were both supportive of that view, and Brodies informed the committee that the feedback that it had received from commercial clients revealed their concern about uncertainty. I urge the cabinet secretary seriously to reconsider his position on the matter, as it could have a direct impact on the construction industry in particular, in its battle out of the economic downturn.
As many witnesses attested, if specific rates cannot be published, guidance about the intentions and an indication of the top rate, at least, would be welcome. That is the very least that people should be able to expect.
Overall, the bill should be a good piece of legislation, delivered under the devolved settlement, which will help Scotland to consider its own property markets and address the concerns that currently exist in the sector.
I would be encouraged if the cabinet secretary could give us some indication that he will reconsider that major point of concern—the only one that divided the committee. It would be useful if we could have the gap closed between those who have concerns and the Government as it pursues the new legislation.
The bill is very worthy of support, although it just needs a little more effort to make it a bit more perfect with regard to what we actually need.
15:38
Little can be found to criticise in the detail of the bill. The concerns that were raised were more to do with issues such as implementation of the tax within the overall taxation regime across the UK. As others have said, major challenges will now be faced when agreement on block grant adjustments has to be reached between the different legislative jurisdictions.
However, the structure of LBTT is not the subject of any great concern. Indeed, more than one voice was heard to say how welcome it was that the Scotland Act 2012 had provided the opportunity to replace stamp duty land tax, with all its inherent flaws. As has been said, among the most welcome aspects of LBTT is the removal of the slab structure and its replacement with a progressive structure. Witnesses were highly supportive of that approach. No organisation was more supportive of it than the Council of Mortgage Lenders Scotland, which rightly identified that it is inevitable that there would be winners and losers in any new system but preferred to look at the positive side. It highlighted the fact that
“a progressive system would be more equitable and overcome some of the inefficiencies created by the slab system.”
However, there was some concern that there could be a disproportionate effect on high-value transactions that are liable to the top rate of LBTT. The CMLS was joined by the Confederation of British Industry Scotland in identifying that concern, but I am less concerned about that aspect of LBTT, as the Scottish Government will continue to ensure that people in higher-cost houses get a nice wee discount on their properties through the council tax freeze, which gives most to those with the deepest pockets and the biggest homes. However, the CBI is right to argue that, when setting the rates for higher-valued domestic properties, the Scottish Government would need to take cognisance of rates that apply elsewhere in the United Kingdom.
Most concern arises—with some justification—regarding the uncertainty that may emerge around LBTT rates in the lead-up to the introduction of the tax, especially in relation to commercial property, because that may discourage investment in the Scottish market. Although Adam Smith would perhaps be very proud of the cabinet secretary’s adherence to the laissez faire free-market policies that he laid down, he would not be very keen to endorse the cabinet secretary’s position with regard to the uncertainly around taxation. I have read and re-read all the evidence that was made available to the committee, and I cannot find anyone, other than the cabinet secretary himself, who gave evidence that ran counter to the view that such uncertainty might be a problem. For us to conclude that there was a range of views on the subject stretches credulity to the limit. Any statistical analysis of the evidence that was brought before the committee could lead us only to the view that the cabinet secretary is an outlier when it comes to where the weight of evidence lies.
The Law Society of Scotland, while commenting that residential rates would not be quite so important, expressed concern that a forward timescale was important for commercial property. In general, witnesses were very clear regarding their view that the absence of any indication of likely future rates of LBTT creates an additional layer of uncertainty. Most important is the view that was posited by the Institute of Chartered Accountants of Scotland, which argued that the lack of clarity even on provisional figures for tax rates or bands goes against the principle of certainty in taxation.
Given the concerns that have been raised over the slump in construction, which emerged again in this morning’s gross domestic product figures, it is worrying that the Scottish Building Federation conveyed a message to the committee that, in relation to commercial rates, it would prefer a minimum of 12 months between the publication and the impact and that, if we could get towards 18 months, that would be even more preferable for the federation. Homes for Scotland and the Scottish Property Federation were both supportive of that view, and Brodies informed the committee that the feedback that it had received from commercial clients revealed their concern about uncertainty. I urge the cabinet secretary seriously to reconsider his position on the matter, as it could have a direct impact on the construction industry in particular, in its battle out of the economic downturn.
As many witnesses attested, if specific rates cannot be published, guidance about the intentions and an indication of the top rate, at least, would be welcome. That is the very least that people should be able to expect.
Overall, the bill should be a good piece of legislation, delivered under the devolved settlement, which will help Scotland to consider its own property markets and address the concerns that currently exist in the sector.
I would be encouraged if the cabinet secretary could give us some indication that he will reconsider that major point of concern—the only one that divided the committee. It would be useful if we could have the gap closed between those who have concerns and the Government as it pursues the new legislation.
The bill is very worthy of support, although it just needs a little more effort to make it a bit more perfect with regard to what we actually need.
15:38
In the same item of business
The Deputy Presiding Officer (John Scott)
Con
Good afternoon. The first item of business this afternoon is a stage 1 debate on motion S4M-06294, in the name of John Swinney, on the Land and Buildings Tra...
The Cabinet Secretary for Finance, Employment and Sustainable Growth (John Swinney)
SNP
The Scotland Act 2012 devolves responsibility for taxes on land and property transactions and disposal to landfill to the Scottish Parliament from April 2015...
Mary Scanlon (Highlands and Islands) (Con)
Con
I am a member of the Public Audit Committee, which has been looking into the Auditor General for Scotland’s report on Registers of Scotland’s IT system. Para...
John Swinney
SNP
I would describe the position as work in progress. As I set out to Parliament last June, Registers of Scotland will be the collection organisation for the ne...
Kenneth Gibson (Cunninghame North) (SNP)
SNP
I am pleased to highlight key areas that the Finance Committee considered following its stage 1 evidence taking.The Scotland Act 2012 devolves a range of tax...
Ken Macintosh (Eastwood) (Lab)
Lab
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, establis...
John Mason (Glasgow Shettleston) (SNP)
SNP
Will the member take an intervention?
Ken Macintosh
Lab
I hope that Mr Mason can demonstrate a sense of humour.
John Mason
SNP
Does the member accept that, if the overall indication is that the effect will be broadly neutral, the room for manoeuvre is not huge? The position is not th...
Ken Macintosh
Lab
Indeed. I was just about to suggest to the cabinet secretary that, if he indicates to the committee and to Parliament when he has agreed on a date, so that w...
John Swinney
SNP
The point that I advanced at the committee is that I was not persuaded by a relief for a property transaction whereby the purchaser got the benefit of an inv...
Ken Macintosh
Lab
I welcome the cabinet secretary’s approach. I have sympathy for the non-renewal of a scheme for which there were no successful applications in Scotland.Howev...
Mike MacKenzie (Highlands and Islands) (SNP)
SNP
Does the member accept that, given the progressive nature of the tax, the proposed measure would help those who are further up the ladder more? Those are the...
Ken Macintosh
Lab
Mr MacKenzie raises an interesting point about our desire as a country to reduce carbon emissions. If carbon emissions on larger homes are greater, we need t...
Gavin Brown (Lothian) (Con)
Con
The Scottish Conservatives support the general principles of the bill and we will vote for it at decision time. Much of the bill and much of what the cabinet...
John Swinney
SNP
I confirm that there will be an indication of the licences that are included in the scope. The bill will specify which licences will be covered rather than s...
Gavin Brown
Con
That is helpful, and it is probably the right way to go about it, so I am even more encouraged on licences than I was to begin with.Before I get too carried ...
The Deputy Presiding Officer
Con
We now move to the open debate. I call Jamie Hepburn, to be followed by Malcolm Chisholm. We are a bit tight for time, so I give Mr Hepburn up to six minutes...
Jamie Hepburn (Cumbernauld and Kilsyth) (SNP)
SNP
I welcome this stage 1 debate. The bill is, of course, the first of three bills arising as a consequence of the Scotland Act 2012, and I look forward to scru...
The Deputy Presiding Officer
Con
You have 30 seconds.
Jamie Hepburn
SNP
The block grant will be reduced on a one-off basis for LBTT. We have to get that right. I say to Mr Macintosh that how fairly the Treasury plays on the matte...
Malcolm Chisholm (Edinburgh Northern and Leith) (Lab)
Lab
I am pleased to take part in this landmark debate, in which we are considering a tax bill for the first time in the history of the Scottish Parliament. I hop...
Stewart Stevenson (Banffshire and Buchan Coast) (SNP)
SNP
Although it closes a loophole, on 21 March 2012, the Chancellor of the Exchequer announced that, with immediate effect, there would be a 15 per cent stamp du...
Malcolm Chisholm
Lab
That is a fair point and I would not disagree.Ensuring that there is no tax avoidance is an important aspect of the bill. The general provision, which will b...
John Mason (Glasgow Shettleston) (SNP)
SNP
It is encouraging that there is widespread welcome for the replacement of SDLT with a simpler and more progressive tax, and especially for the replacement of...
Neil Findlay (Lothian) (Lab)
Lab
Given that John Mason has expressed his excitement about today, will he express some contrition about opposing the Calman commission and the Scotland Act 201...
John Mason
SNP
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...
Michael McMahon (Uddingston and Bellshill) (Lab)
Lab
This is not the first time I have taken part in a stage 1 debate in which there has been very little to say that has not been said already by the time I have...
Mark McDonald (North East Scotland) (SNP)
SNP
I rise as a former member of the Finance Committee. Although I was not part of the stage 1 deliberations on the Land and Buildings Transaction Tax (Scotland)...
Alison McInnes (North East Scotland) (LD)
LD
I, too, welcome today’s stage 1 debate on the first of a series of bills that are being introduced as a result of a number of tax-raising powers being devolv...