Replacement to Air Passenger Duty (APD): consultation analysis

10. Other Administrative Issues

10.1. This final section of the report considers respondents' views on consultation questions relating to a range of other issues regarding the administration of a Scottish APD replacement tax. The main issues administrative issues addressed in Chapters 9 to 14 of the consultation document were:

• Record keeping;
• Tax avoidance and tax evasion;
• Investigatory and enforcement powers;
• Penalties;
• Interest; and
• Dispute resolution.

10.2. We set out respondents' views on each of these issues in turn in the rest of this section.

Record keeping

Q28a: Do you agree with our proposals regarding keeping and preserving records in relation to a Scottish replacement tax?

Q28b: If you answered no, please explain your answer.

10.3. Question 28a asked whether respondents agreed with the Scottish Government proposals regarding the keeping and preserving of records for the Scottish APD replacement tax. These proposals are that certain types of records relating to the tax will be required to be kept for a minimum of five years - similar to the requirement under UK APD for records to be kept for a minimum of six years.

10.4. As was the case in relation to other administrative aspects of the consultation proposals such as registration and tax returns, relatively few respondents answered Question 28a; 28 responses, 18% of all respondents.

10.5. The majority of respondents answering the question agreed with these proposals; 22 respondents, around 4 in 5 of those answering the question. A further 6 respondents indicated that they disagreed with this proposal, including 4 individuals. A large majority of group respondents answering the question agreed with the proposals.

10.6. Five respondents provided further written comment in support of their answer at Question 28a. This included two respondents who supported proposals for keeping and preserving records and three who objected to the proposals, although two of those opposed repeated objections to any reduction in APD, rather than commenting on keeping and preserving records specifically:

• The two respondents in favour of the proposals were both airline/airline representative respondents, and their written comments highlighted the extent to which proposals represent an administrative burden on taxpayers. One of these respondents also recommended that the Scottish Government ensures consistency with UK APD in relation to the specific records to be kept, and the record keeping standards adopted.
• An airport/airport representative respondent opposed to the proposals indicated that this was based only on a suggestion that the Scottish Government also require airports to retain information on passenger numbers; this respondent agreed with all other proposals regarding keeping and preserving of records.

Table 10.1: Q28a Do you agree with our proposals regarding keeping and preserving records in relation to a Scottish replacement tax?

	Yes	No	No response	TOTAL
Airlines and airline representatives	9		3	12
Airports and airport representatives		1	7	8
Other transport and travel organisations	2		11	13
Business, economic development and tourism organisations	2		23	25
Professional tax and accountancy organisations	1		1	2
Environmental organisations			6	6
Other organisations		1	9	10
Group respondents (Total)	14	2	60	76
Individual	8	4	72	84
TOTAL	22	6	132	160
Percentage of all respondents	14%	4%	83%	100%
Percentage of those answering question	79%	21%	-	100%

Tax avoidance and tax evasion

10.7. The consultation document sets out the Scottish Government's proposals for dealing with tax avoidance and tax evasion in relation to a Scottish replacement tax. The tax avoidance proposals are based primarily on the Scottish General Anti-Avoidance Rule ( GAAR) which applies to devolved taxes, and which allows Revenue Scotland to take counteraction against tax avoidance arrangements which it considers to be artificial. A tax avoidance arrangement is artificial if it is not a reasonable course of action in relation to the tax legislation, and/or the arrangement lacks economic or commercial substance.

Q29: To what extent, and in what areas, do you think that artificial tax avoidance is or is not currently an issue with UK APD? If you think it is an issue, what measures could be taken to reduce the potential for such avoidance?

10.8. Question 29 asked respondents the extent to which they think that artificial tax avoidance is an issue with UK APD. A total of 13 respondents provided written comment here; these comprised 8 airline/airline representative respondents, and 5 individuals.

10.9. Most of those providing comment on the extent of any artificial tax avoidance under UK APD felt that this was not a significant issue. This view was expressed by all airline/airline representative respondents making comment. These respondents made reference to APD being relatively straightforward in structure and administration and collection arrangements, and thus providing limited opportunity for artificial avoidance. Some also noted that the number of APD taxpayers is relatively limited, and as such should not present significant enforcement challenges.

10.10. While the majority of those providing comment were of the view that UK APD is not subject to significant artificial avoidance, several respondents made clear that anti-avoidance measures should remain a priority for the Scottish APD replacement tax. This included one airline/airline representative respondent who felt that "many operators" may not be paying APD, and who suggested that collecting APD via the airport as an airport fee would be a more effective approach in terms of tackling tax avoidance.

10.11. In addition to comments specifically in relation to artificial avoidance of APD, one airline/airline representative respondent suggested that growing access to comparative pricing via the internet has led to an increase in the practice of passengers avoiding APD or reducing their APD liability by using hubs outwith the UK.

Q30a: Do you agree with our intended approach to tackling tax avoidance and tax evasion in relation to a Scottish replacement tax?

Q30b: If you answered no, please explain your answer.

10.12. Question 30a asked whether respondents agreed with the Scottish Government's proposed approach to tackling tax avoidance and tax evasion for the Scottish APD replacement tax. As was the case in relation to other administrative aspects of the consultation proposals, relatively few respondents answered Question 30a; 28 responses, 18% of all respondents.

10.13. The majority of respondents answering the question agreed with these proposals; 23 respondents, more than 4 in 5 of those answering the question. A further 5 respondents indicated that they disagreed with this approach, including 4 individuals. Nearly all group respondents answering the question agreed with the intended approach.

10.14. Six respondents provided further written comment in support of their answer at Question 30a. This included four respondents (all individuals) who did not support the intended approach to tackling tax avoidance and evasion. Two of these respondents repeated their objection to the principle of reducing APD, while the remaining two suggested that retaining a UK-wide APD regime would minimise the scope for any evasion.

10.15. Two of those making comment (both airline/airline representative respondents) expressed support for the proposed approach to tackling tax avoidance and evasion in relation to a Scottish replacement tax. This included specific support for proposals to prosecute tax evasion under existing Scots law. However, both respondents expressed some concern regarding the definition of "artificial avoidance" set out under the Scottish General Anti-Avoidance Rule ( GAAR), and specifically the extent to which this is "broad-based" and open to interpretation. These respondents suggested it would be important that the conditions set out under the Scottish GAAR are not subject to a narrow interpretation, and one suggested that clearer rules and guidance on what constitutes artificial avoidance should be provided.

Table 10.2: Q30a Do you agree with our intended approach to tackling tax avoidance and tax evasion in relation to a Scottish replacement tax?

	Yes	No	No response	TOTAL
Airlines and airline representatives	7		5	12
Airports and airport representatives			8	8
Other transport and travel organisations	2		11	13
Business, economic development and tourism organisations	2		23	25
Professional tax and accountancy organisations	1		1	2
Environmental organisations			6	6
Other organisations		1	9	10
Group respondents (Total)	12	1	63	76
Individual	11	4	69	84
TOTAL	23	5	132	160
Percentage of all respondents	14%	3%	83%	100%
Percentage of those answering question	82%	18%	-	100%

Investigatory and enforcement powers

Q31a: Do you agree with our proposals for the investigatory and enforcement powers set out in Chapter 11 that will be available in relation to a Scottish replacement tax?

Q31b: If you answered no, please explain your answer. Are there any other safeguards that might need to apply to them or any other powers you think may be needed?

10.16. Question 31a asked whether respondents agreed with the Scottish Government's proposals for the investigatory and enforcement powers that will be available in relation to the Scottish APD replacement tax, which are consistent with the approach to other devolved taxes. Relatively few respondents answered Question 31a; 23 responses, 14% of all respondents.

10.17. A large majority of respondents answering the question agreed with these proposals; 20 respondents, nearly 9 in 10 of those answering the question. A further 3 respondents indicated that they disagreed with these proposals, including 2 individuals. Nearly all group respondents answering the question agreed with the proposals.

10.18. Three individual respondents provided further written comment in relation to their answer at Question 31a. This included two individuals who objected to any reduction in APD and/or any Scottish replacement tax, and a further respondent who referred to other industries as illustrating the importance of strong regulation and enforcement.

Table 10.3: Q31a Do you agree with our proposals for the investigatory and enforcement powers set out in Chapter 11 that will be available in relation to a Scottish replacement tax?

	Yes	No	No response	TOTAL
Airlines and airline representatives	8		4	12
Airports and airport representatives			8	8
Other transport and travel organisations	2		11	13
Business, economic development and tourism organisations	2		23	25
Professional tax and accountancy organisations	1		1	2
Environmental organisations			6	6
Other organisations		1	9	10
Group respondents (Total)	13	1	62	76
Individual	7	2	75	84
TOTAL	20	3	137	160
Percentage of all respondents	13%	2%	86%	100%
Percentage of those answering question	87%	13%	-	100%

Penalties

Q32a: Do you agree with our proposals for civil penalties in relation to a Scottish replacement to APD?

Q32b: If you answered no, please explain your answer. Are there any other civil penalties that should be considered?

10.19. Question 32a asked whether respondents agreed with the Scottish Government's proposals for civil penalties in relation to the Scottish APD replacement tax, which are based on the penalty framework currently in place for other devolved taxes (with some minor amendments). Relatively few respondents answered Question 32a; 25 responses, 16% of all respondents.

10.20. The majority of respondents answering the question agreed with these proposals; 20 respondents, 4 in 5 of those answering the question. A further 5 respondents indicated that they disagreed with these proposals, including 4 individuals. Nearly all group respondents answering the question agreed with the proposals.

10.21. Four individual respondents provided further written comment in relation to their answer at Question 32a. This included two individuals who objected to the principle of any reduction in APD and/or any Scottish replacement tax. A further two respondents wished to see more substantial penalties in relation to the Scottish replacement tax.

Table 10.4: Q32a Do you agree with our proposals for civil penalties in relation to a Scottish replacement to APD?

	Yes	No	No response	TOTAL
Airlines and airline representatives	8		4	12
Airports and airport representatives			8	8
Other transport and travel organisations	2		11	13
Business, economic development and tourism organisations	1		24	25
Professional tax and accountancy organisations	1		1	2
Environmental organisations			6	6
Other organisations		1	9	10
Group respondents (Total)	12	1	63	76
Individual	8	4	72	84
TOTAL	20	5	135	160
Percentage of all respondents	13%	3%	84%	100%
Percentage of those answering question	80%	20%	-	100%

Interest

Q33a: Do you agree with our proposals for charging interest in relation to a Scottish replacement to APD?

Q33b: If you answered no, please explain your answer.

10.22. Question 33a asked whether respondents agreed with the Scottish Government's proposals for charging interest in relation to the Scottish APD replacement tax, which are consistent with the approach for other devolved taxes. Relatively few respondents answered Question 33a; 27 responses, 17% of all respondents.

10.23. A large majority of those answering Question 33a agreed with the proposals; 23 respondents, more than 4 in 5 of those answering the question. A further 4 respondents indicated that they disagreed with the proposals, including 3 individuals. Nearly all group respondents answering the question agreed with the proposals.

10.24. Four respondents provided further written comment in support of their answer at Question 33a. This included two individuals who did not agree with the proposed approach; for one respondent this was based on an objection to the principle of reducing APD, and for the second respondent this was based on a wish to see APD abolished. Two of those making further comment, both airline/airline representative respondents, agreed with the proposed approach to charging interest. One of these respondents suggested that interest rates should be reflective of market rates, while the second expressed dissatisfaction with the cost of collecting APD currently falling to airlines rather than HMRC.

Table 10.5: Q33a Do you agree with our proposals for charging interest in relation to a Scottish replacement to APD?

	Yes	No	No response	TOTAL
Airlines and airline representatives	8		4	12
Airports and airport representatives			8	8
Other transport and travel organisations	2		11	13
Business, economic development and tourism organisations	2		23	25
Professional tax and accountancy organisations	1		1	2
Environmental organisations			6	6
Other organisations		1	9	10
Group respondents (Total)	13	1	62	76
Individual	10	3	71	84
TOTAL	23	4	133	160
Percentage of all respondents	14%	3%	83%	100%
Percentage of those answering question	85%	15%	-	100%

Dispute resolution

Q34a: Do you agree with our proposals for dispute resolution in relation to a Scottish replacement to APD?

Q34b: If you answered no, please explain your answer. What, if any, other decisions not on the proposed list of appealable decisions do you think should be included?

10.25. The final consultation question asked whether respondents agreed with the Scottish Government's proposals for dispute resolution in relation to the Scottish APD replacement tax, which are based on the internal review, independent tribunal and mediation approaches used for other devolved taxes. Relatively few respondents answered Question 34a; 24 responses, 15% of all respondents.

10.26. A large majority of respondents answering the question agreed with these proposals; 21 respondents, nearly 9 in 10 of those answering the question. A further 3 respondents indicated that they disagreed with these proposals, including 2 individuals. Nearly all group respondents answering the question agreed with the proposals.

10.27. Two individual respondents provided further written comment in support of their answer at Question 34a. One of these respondents suggested that dispute resolution is handled through the courts, while the second respondent repeated their earlier objection to the principle of APD being reduced.

Table 10.6: Q34a Do you agree with our proposals for dispute resolution in relation to a Scottish replacement to APD?

	Yes	No	No response	TOTAL
Airlines and airline representatives	8		4	12
Airports and airport representatives			8	8
Other transport and travel organisations	2		11	13
Business, economic development and tourism organisations	2		23	25
Professional tax and accountancy organisations	1		1	2
Environmental organisations			6	6
Other organisations		1	9	10
Group respondents (Total)	13	1	62	76
Individual	8	2	74	84
TOTAL	21	3	136	160
Percentage of all respondents	13%	2%	85%	100%
Percentage of those answering question	88%	13%	-	100%