Meeting of the Parliament 19 August 2014
It has been interesting and rewarding to be involved with the bill. I am extremely grateful to Professor Gavin McEwen, who gave expert advice to the Finance Committee, and to all other stakeholders who participated in round-table discussions, gave formal evidence and wrote in to try to explain some of the finer complexities of tax.
Iain Gray quite rightly quoted Smith’s maxims. All those maxims have great merit on their own, but it has been very interesting to see that it is far trickier to obey them all at the same time in practice than in theory.
Although there was praise for most of the bill at stage 1, the biggest criticism that was made related to the provisions on penalties. Things had not been done quite rightly in that area and there was a strong view among stakeholders that the circumstances, amounts and factors to be taken into account ought to be on the face of the bill, and that procedure and administration could be left to secondary legislation. The bill team and the cabinet secretary acknowledged that during stage 1 and, helpfully and rightly, the cabinet secretary lodged a raft of amendments at stage 2.
The penalties provisions are now far clearer and have far broader support than they would have had if they had been left as they were at stage 1. For example, section 150, on failure to make a return, previously had no amount attached and simply gave the Government the power to produce regulations. Now, after amendments were agreed to at stage 2, firm amounts have been put against what would be paid in the absence of a return. The provisions have been helpfully divided into time periods: returns that are three, six or 12 months late will be treated differently and receive different penalties. Also, penalties have been split between the two taxes: the regime for land and buildings transaction tax is slightly different from that for landfill tax. Section 150 now does what it ought to do and gives some certainty, but, as the cabinet secretary said, the bill still allows the Government a degree of flexibility to make changes by order, should circumstances prove that to be necessary.
Another example relates to section 160, which is about penalties for an error in the tax return. Previously no penalty amount was set out; it was simply the case that regulations could be brought forward at some point. Now a clear percentage has been set out on what the penalty might be in relation to the tax. Indeed, it is quite helpful that the bill now splits the penalty into two categories: one for deliberate inaccuracies by the person completing the return; and one for inaccuracies that are deemed to be careless as opposed to deliberate. Those two categories are treated separately, as most people would argue they ought to be.
We now have consistency: the regime hangs together and makes sense to taxpayers. All those changes were welcomed when they were made and I welcome them again.
During this afternoon’s discussion of amendments, the cabinet secretary touched on the issue of a penalty for failure to pay tax. Everyone in the chamber agreed to today’s amendments in that regard. Previously, I had some concerns over the provision: there would have been, in effect, an instant penalty if the tax was not paid on or before the due date, which was a little harsh. The cabinet secretary agreed to reflect on the matter, and what has emerged is a good set of amendments that we considered today. They provide that, at least in the case of LBTT, taxpayers will have 30 days to pay the penalty.
There was criticism of the proposals for a charter of standards and values. The bill as introduced seemed to put a slightly greater obligation on the taxpayer than it did on revenue Scotland. Taxpayers had to obey; revenue Scotland had to “aspire” to the standards in the charter. The Government changed the wording, quite rightly, to provide that both sides must “adhere” to the charter. There will be reciprocity, as opposed to the balance being in favour of revenue Scotland.
Both the committees that considered the bill thought that ministerial guidance to revenue Scotland must be made public. That, too, has been provided for in an amendment that we considered today, which makes it clear that ministerial guidance will be laid before the Parliament.
The bill started well and has been improved, as the cabinet secretary said. We will happily support it at decision time.
16:06