Principles underpinning Scottish tax system may be difficult to achieve, say tax professionals

The findings are included in a written submission by the Chartered Institute of Taxation (CIOT), its Low Incomes Tax Reform Group (LITRG) and its sister body, the Association of Taxation Technicians (ATT) to the Scottish Parliament’s Finance Committee, who are undertaking an inquiry into a Scottish approach to taxation.

While an average of 94 per cent of respondents indicated their support for the Scottish Government’s four principles of proportionality, certainty, efficiency and convenience, just 24.1 per cent viewed these as achievable, with the remainder either undecided (41 per cent) or viewing the goals as unachievable (34 per cent).

The submission also suggests that one way of translating the principles into practice could be to enshrine them within legislation, proposing that a body such as the Scottish Fiscal Commission takes responsibility for reviewing tax legislation against the four values.

With significant new powers over tax and spending set to be devolved from the UK Parliament to Holyrood in 2017, the CIOT and ATT reiterated their call for a public information campaign designed to educate and inform the public of the current and forthcoming changes.

The CIOT/ATT survey also found strong support for ensuring that Scotland’s devolved taxes align with the rest of the UK in one form or another, arguing that alignment would reduce complexity, costs and uncertainty for individuals and businesses. 6 per cent offered their support for a truly distinctive approach, while 57 per cent said that the involvement of HMRC would limit the scope for a different tax system in Scotland.

The bodies also highlighted a number of possible limitations on the introduction of a distinctive Scottish system. These included the degree to which taxes are either devolved or reserved and a lack of understanding of both the Scottish and UK tax systems more generally.

Commenting on the submission, Moira Kelly, Chair of the CIOT Scotland Technical Committee said: “With yet more changes forthcoming as a result of increased devolution, it has never been more important for the Scottish public to understand who is responsible for setting, collecting and spending taxes raised here in Scotland.

“Our members have a crucially important role to play – both as advisers to Scottish taxpayers and as taxpayers themselves.

“The Scottish Government’s proposals for a system underpinned by Adam Smith’s four principles of proportionality, certainty, efficiency and convenience are noble, but we must all work to ensure that the theory behind these is achieved in practice.”

Ralph Pettengell, the President of the ATT said: “The Scottish Government have a unique opportunity to develop a modern, clear, fair and robust tax system almost from scratch and Adam Smith’s principles are a good starting point.

“Our members have voiced concern over whether this is achievable. Whether this is because we are still at a relatively early stage of understanding how devolution of taxes will work in practice or because the Scottish tax system will retain a high level of consistency and interaction with the rest of the UK, remains to be seen.

“We would welcome further opportunities to liaise with the Scottish Government and Scotland’s political parties on the design and implementation of Scotland’s approach to taxation and hope that they would draw on the experience and expertise of our members.”