Meeting of the Parliament 19 August 2014
In the stage 1 debate, I quoted Albert Einstein, as I do whenever I am given the opportunity. Einstein said:
“The hardest thing in the world to understand is the income tax.”
I doubt that Einstein ever had to worry about land and buildings transaction tax, and he certainly did not have to worry about landfill tax, so we can probably assume he was talking about the complexity of tax in general. When I looked back at that stage 1 debate, I saw that most of us began by noting how dull tax legislation is considered to be and how complicated it turns out to be—although I have spotted one accountant of my acquaintance who has been drawn to the public gallery by our deliberations, so these things are a matter of taste.
Perhaps it is a sign of the times that we live in that today’s debate—technical, pragmatic and, above all, consensual—feels rather like light relief from what passes for political discourse the rest of the time at the moment. The fact is that although we began with the shared purpose of creating revenue Scotland to administer and manage the devolved taxes—the landfill tax and the land and buildings transaction tax—it still turned out to be a complex task to get right sometimes, despite that consensus and shared purpose. That is all the more reason to congratulate the bill team on its work in drafting and redrafting the legislation to get us to the position that we are in today, where I think that we can be sure that the bill will be passed overwhelmingly—indeed, unanimously—at decision time.
The Finance Committee, on which I do not sit, deserves our thanks, too: first, for taking comprehensive, complicated and exhaustive evidence on the bill at stage 1; and, secondly, for dealing with some 300 amendments at stage 2. Perhaps unusually for me, I also want to praise the cabinet secretary for his efforts in steering the legislation through, including the further 140 amendments dealt with today. There have been almost 450 amendments since the bill was introduced and although we dealt with the 140 amendments in pretty short order this afternoon, they included some significant improvements in response to the committee’s scrutiny of the bill. I will mention some of them in a moment.
As the cabinet secretary noted, today marks not just the completion of the passage of the Revenue Scotland and Tax Powers Bill but the completion of a trilogy of linked bills that create the first devolved national taxes and the body that will administer and manage them. Therefore, we are completing a significant task today, and I am tempted to say to the cabinet secretary that, apart from pursuing the important matter of a future for the Ferguson shipyard, perhaps he should take the next few weeks off, put his feet up and stay out of trouble. However, I expect that he has other plans, which is a pity in a way because the task that he is completing today is real proof of the power and flexibility of the devolution settlement that I fear he will spend the next four weeks trying to destroy.
The three bills, of which this is the third, derive, of course, from the Calman process and the consequent Scotland Act 2012. They constitute a significant step forward in rebalancing the devolution settlement by securing new fiscal powers and decision making for this Parliament without breaking the social, economic and political union with the rest of the United Kingdom that provides us with such significant opportunities. Nonetheless, we have consensus for today on the bill.
That consensus started with the approach that was taken to creating a new tax system—the fundamental principle. The cabinet secretary made much of his starting point being Adam Smith’s four maxims for a tax system: certainty, convenience, efficiency and proportionality in relation to the ability to pay. He was right, and has had support across the chamber for that principle-based approach to the legislation.
It has been interesting to see how turning those maxims into detailed legislation is less straightforward than might have been assumed, as they can sometimes contradict themselves, but I think that some of the 400-odd amendments have taken us in the right direction. For example, we now have on the face of the bill greater certainty over penalties. More important, amendments both at stage 2 and at stage 3 today have made the definitions of what constitutes tax avoidance much clearer and more certain.
As the cabinet secretary knows, we have supported his approach to tax avoidance from the start. We agree with him that we should have a general anti-avoidance rule rather than a general anti-abuse rule. We agree that the double reasonableness test should be avoided, that the test should be of artificiality rather than of abusiveness and that arrangements where tax avoidance is one of the purposes—not just the sole or main purpose—should also be caught by the general rule. In other words, we agree with the cabinet secretary that the net should be cast wider than in previous legislation—as, indeed, it has been.
However, we have pursued further clarity, notably through Malcolm Chisholm in committee, and I am glad to acknowledge once again that the cabinet secretary has put it beyond doubt that the general rule applies to transactions between individuals as well as companies or businesses.
In his speech, the cabinet secretary referred to the consultation, guidance and secondary legislation that will follow the passing of the bill. We should acknowledge that there is still work to be done. Indeed, we will not know whether the bill meets the maxim of efficiency until it is tested in action; of certainty until consequent guidance and secondary legislation are completed; or of proportionality until tax rates are actually announced, which will have to happen quite soon, as the cabinet secretary must know.
However, we can claim a good piece of legislation—one that has been improved by the legislative process and which can, should and will, I am sure, be supported at decision time.
16:00