Breaking New Ground? Developing a Scottish tax to replace the UK Aggregates Levy: consultation

Chapter 9: Tax Avoidance and Evasion

9.1 Where it has the power to do so, the Scottish Government wishes to take the toughest possible approach to tackling tax avoidance in relation to Scotland's devolved taxes.

9.2 This is captured in the "Effectiveness" principle of our tax strategy:

• "Design of the tax system should focus on ensuring taxes raise the expected revenues and achieve their intended aims. This includes designing taxes that minimise opportunities for tax avoidance. The vast majority of taxpayers want to pay the correct amount of tax, and do, but where taxpayers do engage in avoidance practices governments and tax authorities should respond quickly and proactively to tackle them."

9.3 The Scottish General Anti-Avoidance Rule (GAAR) is established in Part 5 of the RSTPA 2014. It allows Revenue Scotland to take counteraction against tax avoidance arrangements in relation to devolved taxes which it considers to be artificial, even if the arrangements otherwise operate within the letter of the law.

9.4 The Scottish GAAR is significantly wider than the corresponding UK General Anti-Abuse Rule which is based on a narrower test of "abuse" rather than "artificiality‟. The Scottish Government intends that the Scottish GAAR will also apply to a Scottish replacement to the UK Aggregates Levy.

Questions

B15 – Are there any areas where artificial tax avoidance might be a concern for a devolved tax? If so, what measures could be taken to reduce potential avoidance?

9.5 Tax evasion (also known as tax fraud) is the illegal non-payment or underpayment of tax, for example by deliberately misrepresenting or withholding information. Fraud (including fraud by agents) is already a common law offence in Scots law, for which the sanction can be an unlimited fine and/or an unlimited term of imprisonment.

9.6 For this reason the Scottish Government did not introduce legislation via the RSTPA 2014 for a new offence of evasion of devolved taxes, and new legislation is not therefore considered to be required to ensure that evasion of the devolved aggregates tax will be an offence. Where it is suspected that evasion of the devolved tax either has taken or is taking place, the matter will be referred to the appropriate authorities by Revenue Scotland for consideration.

Questions

B16 – Do you agree that the existing arrangements in place regarding tax evasion will be sufficient for the new devolved tax?

If no, please provide commentary to explain your views.