Building a better tax system
By Charlotte Barbour, Director of Taxation
7 April 2021
Charlotte Barbour outlines the priorities for the Scottish tax system in the 2021- 2026 Scottish Parliament, as detailed in the joint ICAS CIOT Tax paper ‘Building a Better Tax System’ .
Scotland’s tax system has continued to evolve since the last Scottish Parliament elections in 2016. ‘Building a Better Tax System’, the ICAS and CIOT joint tax manifesto for the Scottish Parliament elections, identifies three areas of policy that need to be addressed to help deliver a devolved tax system which can continue to evolve, and -be sustainable, resilient, and better understood by taxpayers.
Strengthen decision making
First, there are proposed actions to strengthen decision-making and accountability, so that tax can take a more prominent role in the Scottish political calendar. Tax decisions should be more visible as they are the bridge between policy aspirations and policy delivery. Voters need to have the opportunity to see clearly how these decisions are being made.
To improve parliamentary oversight of Scotland’s taxes and strengthen decision-making, we recommend:
- Creating a full-time Minister for Scottish Taxes with political accountability for Scottish tax policy and its relationship to the wider UK tax regime
- A Scottish Taxes Bill that, like the Budget Bill, provides for a guaranteed slot in the parliamentary timetable to make the legislative changes needed to maintain the integrity of the tax system
- A dedicated Finance Committee, returning the focus of the Committee exclusively to the scrutiny of tax and spending decisions (rather than, as at present, the Finance and Constitution Committee)
- Improved collaboration between the institutions responsible for Scottish taxes and their interaction with the wider UK tax system across Scotland and the UK. This should include a reset in relations between the UK Government and the devolved administrations to better recognise the continuing importance of UK tax decisions for devolved tax policy choices
Making the case for new taxes
Second, we detail the steps that should be considered when introducing or reforming taxes, with a view to creating a longer-term approach to tax policymaking. It is an area that may take on greater significance as debates over how to pay for the cost of the pandemic increase in a post-coronavirus world.
Decisions to introduce new taxes should not be left to the mercy of last-minute Budget concessions. A less scattergun, and more strategic approach, to tax-policy making is in the best interests of the long-term health of the tax system. The case for reforming existing taxes or introducing new taxes must be grounded in:
- Identifying the purpose and locus of the tax
- Consulting early and widely on how the tax is to be designed and operated
- Ensuring the structures of Parliament are fit for purpose to facilitate better tax policy making
- Maintaining sight of existing tax powers
- Ensuring collection and compliance are easy
Improving public understanding
Last but not least, we call on the Scottish Parliament to consider how it can improve public awareness and understanding of the devolved tax regime.
Awareness and understanding of the devolved taxes are low, but voters should be able to better understand the tax powers of the Scottish Parliament so that they can hold their representatives accountable. Devolution provides an opportunity for Scotland to take the lead and promote a devolved tax regime that leads to a better-informed – and engaged – public. This can be helped by:
- Reinstating the Scottish Government’s pre-pandemic work on a tax communications strategy to show taxpayers how the tax system works, the responsibilities that the UK and Scottish governments have over the tax system and the contribution that the devolved taxes make to public services
- Promoting better understanding of the tax system by considering the role that Scotland’s education system can play in boosting public awareness and understanding of how the tax system works
- Greater visibility for the devolved taxes in the Scottish political calendar
ICAS would like your feedback
We welcome input from members about the ICAS tax policy work - please send us your feedback by emailing tax@icas.com.