Committee
Finance and Public Administration Committee 22 March 2022
22 Mar 2022 · S6 · Finance and Public Administration Committee
Item of business
Framework for Tax
You identify a tension that exists between administrative complexity and policy impact. The ability to take decisions on the taxes that I have referred to—especially national insurance and VAT—offers the potential for significant policy impact. I am not saying that that is not the case with other taxes. I appreciate that, with the cost of living crisis and the events that are unfolding in eastern Europe—which the framework predates—fuel duty has taken on an added dimension. My key point is about the issues that we could address if we had powers over national insurance and VAT, examples of which I gave earlier: the marginal rate that exists between the higher Scottish rate and the upper earnings limit, and the implications of VAT for the deposit return scheme and for our work on decarbonising heat in buildings. You will be aware of some of the challenges that exist with regard to VAT in relation to the refurbishment and renovation of properties. There are areas where control of those taxes could be impactful. 11:15 There is also the question of going in with a clear set of asks and objectives with regard to further devolution of tax policy in the context of the fiscal framework review. My final point, which relates to a point that Mr Johnson made, is to recognise that the taxes in question are significant revenue-raising taxes. If we had a broader suite—or basket—of taxes, we would be less reliant and exposed to volatility on income tax.
In the same item of business
The Convener (Kenneth Gibson)
SNP
Good morning and welcome to the 11th meeting in 2022 of the Finance and Public Administration Committee. Agenda item 1 is an evidence-taking session on the...
The Minister for Public Finance, Planning and Community Wealth (Tom Arthur)
SNP
Thank you and good morning. I begin by extending my thanks to the committee for inviting me to give evidence on Scotland’s first framework for tax. I underst...
The Convener
SNP
Thank you very much for that very interesting statement. I believe that a lot of questions will emerge from it. You mentioned two new principles, the first ...
Tom Arthur
SNP
This relates in the first instance to how the document itself—which I have described as a foundation document—was created. There was extensive consultation. ...
The Convener
SNP
Thanks for that response, but what you have outlined is not really public engagement, is it? It involves stakeholders and people like that. How many will the...
Tom Arthur
SNP
There is engagement with stakeholders, but there have also been public consultations. For example, there is a public consultation on the additional dwelling ...
The Convener
SNP
Prior to the devolution of income tax and in the run-up to 2017, there was a lot of discussion about how Scotland would address tax avoidance differently fro...
Tom Arthur
SNP
I refer members to the decision-making matrix in the document, which lists six aspects of how we go about taking decisions on tax policy. They are not number...
The Convener
SNP
My understanding was that the Scottish Government was going to take a principled approach to tax avoidance in contrast to the UK’s position, under which, unl...
Tom Arthur
SNP
That principle is still contained in our framework, which is why we have expanded the reference beyond tax avoidance to cover effectiveness. Looking at this ...
Alex Doig (Scottish Government)
What you have said is right, minister. This is not about waiting for avoidance activity to happen, but about designing tax policy that gives us every opportu...
The Convener
SNP
Is that different from what happens in the UK? 09:45
Alex Doig
It is difficult to answer that question—it is very broad.
The Convener
SNP
We are talking about the Scottish tax framework, so I just want to see what is Scottish about it. How is it different from the UK framework? It was my unders...
Alex Doig
I can speak only to this framework and to the Scottish Government’s approach, but certainly, as the minister has said, we have been clear about anti-avoidanc...
The Convener
SNP
Thanks for that. Moving on, I note that the framework talks about ensuring that Scotland’s public finances are fiscally sustainable. The issue of fiscal sus...
Tom Arthur
SNP
With regard to how we use our tax powers, the framework sets out a range of principles that are applicable to the question that you have asked. Perhaps I can...
The Convener
SNP
Of course, we have to have a productive—and, in fact, increasingly productive—economy. It has to be increasingly productive per capita, because of the demogr...
Tom Arthur
SNP
That is an excellent set of questions. I am trying to think of a way that I can answer them concisely in 90 seconds or a couple of minutes.
The Convener
SNP
Take as long as you like.
Tom Arthur
SNP
Okay. Let me break it down. On the broader issue of productivity, we have just published a national strategy for economic transformation, which sets out a r...
The Convener
SNP
Hold on a second, minister. There is no reason why we cannot attract migrants from other parts of the United Kingdom if we have a growing and thriving econom...
Tom Arthur
SNP
That is a fair point. I am not suggesting that migration is a silver bullet—it is part of a broader range of measures. If we are going to consider intra-UK m...
The Convener
SNP
I just want to mention a couple of other wee things before I let others in. First, on the North Sea, there are a lot of highly paid workers there—71,000 at ...
Tom Arthur
SNP
With regard to behaviour change, there is the principle of efficiency. We do not want tax policy that leads to distortionary effects, because that will ultim...
The Convener
SNP
Some workers might find it easier to move to Saudi Arabia and pay their taxes there if we do not get the highly paid and highly skilled jobs that we are talk...
John Mason (Glasgow Shettleston) (SNP)
SNP
Thank you, convener—it is unusual for me to come in second; that is nice for a change. The minister mentioned that council tax reform will be considered by ...
Tom Arthur
SNP
The question is fair but, to be up front, I am not in a position to give a concrete timescale. This is a commitment and a key priority, and I am working to t...
John Mason
SNP
Can we assume that the outcome will not be to support council tax?
Tom Arthur
SNP
The citizens assembly will look not just at council tax but at resourcing of local government and council tax. A process will lead up to that, which will inc...