A Consultation on Tax Management: Analysis of Responses

3. REVENUE SCOTLAND

Purpose, function and duties

3.1 The purpose of establishing Revenue Scotland is to ensure that the revenue from Scotland's devolved taxes will be collected and made available to fund public services in Scotland. Revenue Scotland will be expected to carry out this purpose efficiently and effectively and in accordance with high standards of propriety, integrity and transparency. The Scottish Government proposes that the principal function for Revenue Scotland is:

"to ensure the efficient and effective care and management of the devolved taxes and that tax receipts are paid to the Scottish Consolidated Fund."

3.2 It is expected that the generic duties that apply to all public bodies in Scotland will apply to Revenue Scotland, including adhering to Equalities law and to the rules set out in the Scottish Public Finance Manual. In addition, the following specific duties are proposed:

• to administer the devolved taxes, collecting the highest net revenue practicable, while exercising appropriate discretion over cases of exceptional hardship or where further pursuit of unpaid tax would not be in the public interest;
• to provide information and guidance to taxpayers and their appointed agents about the Scottish approach to tax, about taxpayers' obligations, and about the processes to be followed;
• to work with taxpayers to resolve disputes about tax as efficiently as possible;
• to identify cases of potential fraud or other criminal activity and, working as appropriate with other public bodies, to ensure that these are reported to the Crown Office and Procurator Fiscal Service in relevant cases;
• to provide information and advice, including policy advice, about the administration of tax to the Scottish Government and the Scottish Parliament, including providing forecasts of tax receipts and information on achieving targets;
• to have regard to relevant guidance issued by Scottish Ministers and, from time to time, to agree with Ministers a corporate plan setting the strategy for Revenue Scotland; and
• to fulfil all relevant EU and international obligations; liaising with other revenue authorities, in particular, HMRC, on behalf of the Scottish Government.

3.3 The consultation asked:

Question 1: What are your views on the proposed function and duties of Revenue Scotland?

3.4 Twenty one respondents (75% of all respondents) addressed this question.

Table 2: Respondents to Question 1

Category	No.	%
Tax accountants and professional tax bodies	9	43
Public bodies	3	14
Legal professional bodies	2	10
Local authority bodies	4	19
Business	3	14
Total	21	100

General comments

3.5 Overall, the proposed function and duties of Revenue Scotland were well received. Three respondents (LA, LA, Tax) commented that they were appropriate both for the short term and for the future when further taxes may be administered by Revenue Scotland. One tax professional remarked that the function and duties proposed were in line with best practice for tax authorities in other tax regimes and dovetailed well with the existing functions and duties of HMRC.

3.6 One respondent argued, however, that terms like "appropriate discretion" and "exceptional hardship" were subjective, and that the function and duties of Revenue Scotland should be presented more objectively, in "simple, unqualified terminology" (Scottish Committee of the Administrative Justice and Tribunals Council (SCAJT)).

Views on proposed function of Revenue Scotland

3.7 The proposed function received broad support. Only two substantive comments were received:

• may be appropriate for the function to be supported by accompanying benchmark performance measures such as processing times (Bus, LA)
• replace "care" with "collection" (Leg).

Views on the proposed duties of Revenue Scotland

3.8 The first duty proposed attracted most response, and in particular the wording: "....collecting the highest net revenue practicable". In total, 12 respondents (including all nine tax professionals) opposed the wording of this duty. The prevalent view was that left unqualified, the duty appeared out of step with underpinning legal and social justice aims. One remarked:

"Such an approach would be entirely out of keeping with any notion of fairness, which should certainly be expected from a tax authority" (Law Society of Scotland).

3.9 Suggestions were made for improving the draft:

• inserting wording to make explicit that Revenue Scotland will act in accordance with the law
• making it clear that Revenue Scotland will collect the "correct" or "appropriate" amount of tax.

3.10 One tax professional proposed a staged approach to the duty, suggesting that firstly, an assessment should be made of the correct amount of tax due according to the law, and secondly, the highest net revenue practicable should be collected, taking into account hardship.

3.11 One further comment (Tax) was that for the avoidance of doubt, the duty to exercise discretion should specify hardship for businesses as well as for individuals.

3.12 Four respondents commented on the second duty proposed. Three (Tax, Leg, Leg) emphasised that information and guidance should be readily accessible and comprehensible, perhaps with examples of how tax applies to particular situations. One public body suggested that the duty be extended to include information and guidance on the rights of review, appeal and complaints.

3.13 Only one respondent commented specifically on the third duty proposed. They suggested changing the wording to:

"to work with taxpayers to resolve disputes about tax as fairly and efficiently as possible" (SCAJCT).

3.14 One respondent (Tax) remarked in relation to the proposed fifth duty that it may be appropriate for Revenue Scotland to have a broader role in advising the Scottish Government on policy issues over and above the administration of tax, e.g. the efficacy and fairness of tax policies. They also considered that Revenue Scotland may be well-placed to assist in ensuring that as far as possible, legislation is written clearly and simply and makes Parliamentary intention as clear as possible.

Additional duties

3.15 Suggestions were made for additional duties:

• to consult on new tax law unless this falls within the rules set out in the Scottish Public Finance Manual (SPFM)/Equalities law (Tax)
• to ensure guidance material covers legislative interpretation, including the relevance of UK case law precedents, with areas of difference between UK and Scottish legislation highlighted (Tax)
• to ensure a duty of care in relation to taxpayers' information with responsibility to ensure taxpayers' confidentiality (Bus)
• to provide easily accessible and comprehensible guidance about how the taxes apply to transactions in which taxpayers are involved (Bus)
• to ensure duties are carried out to high standards (Bus).

Challenges

3.16 In considering the appropriateness of the proposed function and duties of Revenue Scotland, five respondents identified challenges:

• In delegating administration to SEPA and RoS, function and duties need to be clearly managed to prevent duplication and conflicting services to taxpayers (LA, LA, PB).
• Care should be taken to ensure clarity over the difference between HMRC and Revenue Scotland. It was recommended that consideration be given to the branding of Revenue Scotland to assist with clarifying the distinction (Tax).
• It may be challenging for HMRC to separate data for Revenue Scotland's purposes (LA).

Accountability and legal status

3.17 The consultation asked:

Question 2: What are your views on the proposal to establish Revenue Scotland as a Non-Ministerial Department (NMD), part of the Scottish Administration and accountable to the Scottish Parliament?

3.18 Twenty one respondents (75% of all respondents) addressed this question.

Table 3: Respondents to Question 2

Category	No.	%
Tax accountants and professional tax bodies	9	43
Public bodies	3	14
Legal professional bodies	2	10
Local authority bodies	4	19
Business	3	14
Total	21	100

3.19 All but one of the respondents who addressed this question considered the proposal to be reasonable, one referring to it as a "pragmatic proposal" (Scottish Property Federation). The remaining respondent (PB) agreed that the new tax authority should operate independently of Ministers but requested more information on the relative merits of a NMD over a Non-Departmental Public Body (NDPB).

3.20 A few respondents set out their reasons for supporting the proposal. The main attractions were:

• independence from the Scottish Government
• retention within the Scottish Administration
• accountability to the Scottish Parliament
• concept of NMDs already well understood.

3.21 Two respondents (Tax, Bus) sought further clarification on how Revenue Scotland's accountability to the Scottish Parliament would be achieved in practice, particularly in the context of constraints over confidentiality of taxpayer information.

3.22 Three tax professionals emphasised that lines of responsibility will need to be very clearly drawn due to the proposal that the new tax authority works in partnership with SEPA and the RoS in administering tax.

Views on the proposed staffing of Revenue Scotland

3.23 Whilst it was generally agreed that the proposal to staff Revenue Scotland with civil servants would offer useful flexibility to transfer staff between Revenue Scotland and core Scottish Government and other NMDs, this proposal also raised concerns amongst five respondents (four tax and one local authority) over ensuring expertise amongst staff, stability of staff and retention of expertise. One respondent remarked:

"Whilst we understand the potential flexibility available to enabling staff to transfer between Revenue Scotland and the core Scottish Government and other non-Ministerial Departments, the staff at Revenue Scotland will need to build up and retain a core level of expertise. It needs to develop and retain its staff to meet these challenges and should not be seen as a mere "staging post" on the civil service career path" (Institute of Chartered Accountants in England and Wales (ICAEW)).

Leadership and governance

3.24 Options for the leadership, oversight and governance of Revenue Scotland include:

a) An entirely executive Board comprising the Chief Executive and at least 2 members of the senior management team (with no non-executive members). The whole executive board would be held accountable for the performance of Revenue Scotland.

b) A single non-executive Chair for the organisation to whom the Chief Executive would report. The non-executive Chair would be held accountable for the performance of Revenue Scotland.

c) A Board with a non-executive Chair comprising both non-executive and executive members. The Chief Executive could be a full member of such a Board. The Board with the Chair in the lead, would be held accountable for the performance of Revenue Scotland.

d) A Board made up entirely of non-executive members to which the Chief Executive would report. The Board, with the Chair in the lead, would be held accountable for the performance of Revenue Scotland.

3.25 The Scottish Government proposes that the non-executive oversight of Revenue Scotland will be essential in ensuring transparency and robustness of challenge. It also considers it to be important that the oversight mechanism should provide clear accountability, a framework in which management can operate effectively, and responsiveness to Ministers, the Parliament and the people of Scotland. Option d) is believed to best meet these criteria since it gives a strong role to non-executives and it is considered that a small non-executive Board is likely to be most effective.

3.26 It is proposed that there is transparency in the process of selecting and appointing those responsible for Revenue Scotland. Its staff, being civil servants will be appointed through fair and open competition regulated by the Civil Service Commission. It is proposed that any non-executive Board members will be appointed in line with the Nolan principles.

3.27 It is expected that the Chief Executive will be the Accountable Officer for Revenue Scotland and views are sought on a distinctive title for this post, such as Comptroller-General or Chief Collector.

3.28 The consultation asked:

Question 3: What are your views on the governance options for Revenue Scotland, and on how people should be selected for appointment to the Board and to the post of Chief Executive?

3.29 Seventeen respondents (61% of all respondents) addressed this question.

Preferred governance options

3.30 Sixteen respondents expressed a preference for one or more of the governance options as follows:

Table 4: Views on the governance options for Revenue Scotland

	Options					Total
	a)	b)	c)	d)	c) or d)
Tax accountants and professional tax bodies			5	1		6
Public bodies					1	1
Legal professional bodies			2			2
Local authority bodies	1			3		4
Business				1	2	3
Total	1		7	5	3	16

3.31 The option given most support by respondents was option c), a Board with a non-executive Chair comprising both non-executive and executive members. This option was supported by 10 of the 16 respondents providing a view. Option d), the preferred approach of the Scottish Government, comprising a Board made up entirely of non-executive members to which the Chief Executive would report attracted support from eight respondents.

3.32 A summary of views on each option is below.

Option	For	Against
a)	Operates in New Zealand and Australia (LA) Suitable given compactness of Scotland and Revenue Scotland's accountability to the Scottish Parliament which will take a keen interest in its performance (LA).	Lacks diversity of membership required for proper level of internal scrutiny and performance management over a public body (PB).
b)		Lacks diversity of membership required for proper level of internal scrutiny and performance management over a public body (PB).
c)	Provides for good accountability whilst making the CE post tenable (Tax). Provides for external perspective and challenge (Bus). Non executives will ensure commercial view brought to the Board (Bus).
d)	Well understood and effective for public sector bodies in Scotland (LA, Bus). Provides for external perspective and challenge (Bus). Non executives will ensure commercial view brought to the Board (Bus).	Gives adversarial position where the CE in particular would be isolated from the Board (Tax)

Views on the title for the Chief Executive

3.33 It is proposed that the Chief Executive of Revenue Scotland will be the Accountable Officer for Revenue Scotland. Five respondents provided their view on an appropriate title for this post. The suggested titles of "Comptroller-General" or "Chief Collector" were considered to be dated (Tax, Leg), or implying responsibility for just one part of the organisation (Tax). Two tax professionals argued for "Chief Executive" as indicating clearly who is in charge. One suggested that should an alternative be sought, then "Head of Revenue Scotland" may be suitable. One local authority proposed the title, "Commissioner of Taxation"; a legal professional body suggested, "Controller".

Views on the appointment of Chief Executive and Board members

3.34 Eleven respondents commented on either the process of appointments, or the composition of the Board.

3.35 The overriding view was that transparency will be essential in making appointments. Respondents also recommended that the Board should reflect expertise in tax and administration, and a range of different perspectives. One summed this up:

"Selection of the Board and the appointment of the Chief Executive must be wholly transparent and bring the correct blend of knowledge and experience from both public and private sector with the right balance of knowledge from different sectors and organisations that will support the effective operation of Revenue Scotland" (British Bankers' Association).

3.36 One local authority recommended that the Board should reflect Scottish society and suggested it comprise representatives from a broad range of organisations, as is the case for the Scottish Government's Tax Consultative Forum. Another requested local government representation on the Board.

3.37 Three respondents (LA, LA, Bus) explicitly supported non-executive Board member appointments being made in line with the Nolan principles.

Public engagement and communications

3.38 The list of duties proposed for Revenue Scotland places emphasis on public engagement and the provision of information for taxpayers and their appointed agents. Engaging regularly and appropriately with taxpayers, their agents and the community of tax professionals will be a key requirement for Revenue Scotland

3.39 The consultation asked:

Question 4: When, how and on what subjects should Revenue Scotland engage with taxpayers, their agents and tax professionals?

3.40 Eighteen respondents (64% of all respondents) addressed this question.

Table 5: Respondents to Question 4

Category	No.	%
Tax accountants and professional tax bodies	8	44
Public bodies	2	11
Legal professional bodies	2	11
Local authority bodies	3	17
Business	3	17
Total	18	100

Consultation

3.41 A series of principles of consultation with taxpayers, their agents and tax professionals emerged from responses and are summarised below:

• consultation should be meaningful and genuinely capable of leading to change
• sufficient time should be allowed - periods of between two months to longer than three months were suggested depending on the issue
• consultation should take place at an early stage in policy development
• both formal and informal consultation is useful
• the outcomes from consultation should be published
• consultation should have a wide reach
• consultation should be proportionate - not burdensome
• regular consultation is to be encouraged
• consultation should be fit for purpose and tailored, so that some technical or operational topics may justify a formal, public approach, whilst other issues may warrant informal discussions only.

3.42 Respondents suggested a wide range of forms of consultation for consideration. These were:

• surveys undertaken through member organisations or others with an interest in tax
• standing user consultative groups which meet regularly
• conferences with Revenue Scotland in attendance
• regular group forums with agents and service users
• face-to-face meetings
• workplace meetings (once more taxes come under Revenue Scotland's remit)
• written consultation documents (but taking care to ensure no one is digitally excluded)
• workshops with invited groups
• discussion meetings and seminars
• a "large employer" consulting group
• regular events hosted by Revenue Scotland in which policy development can be described and comments invited
• a secure, virtual space on the Revenue Scotland website where interaction can take place.

3.43 A recurring theme was that topics for consultation should include technical, operational and administrative developments and changes. One respondent commented:

"Revenue Scotland should consult on developments of a technical and administrative nature. With technical changes this would mean that their practical interpretation and application can be considered to ensure they meet the intended policy objectives; with administrative proposals, consideration can be given to their effectiveness and impact on both taxpayers and agents" (The Institute of Chartered Accountants of Scotland (ICAS)).

3.44 One respondent (Tax) suggested that Revenue Scotland should consult on its performance.

3.45 At a strategic level, the Tax Consultation Forum received cross-sector support although one respondent (Leg) considered it would benefit from having a greater degree of tax practitioner involvement.

3.46 The Devolved Tax Collaborative was welcomed by two legal professional bodies, although one expressed concern that it was in danger of becoming unworkable due to the number and diversity of constituent members. It was suggested that smaller, more targeted working groups could be created within the Collaborative's overall framework.

Views on appropriate information channels

3.47 Two tax professionals recommended ways in which Revenue Scotland can impart information to taxpayers and their agents. These were:

• through the media
• education system
• advice centres
• workplaces
• using something akin to the current HMRC advice manuals which set out areas of concern and HMRC's view on how legislation is working.

Views on key topics for promoting to stakeholders

3.48 Four respondents identified the type of information they considered Revenue Scotland should impart to stakeholders:

• changes to policy (Tax, Tax, LA)
• changes to rates and tax banding (LA)
• changes to administrative procedures (LA)
• data on what tax revenues are actually generated in Scotland and from where (Bus).

Provision of information

3.49 It is proposed that Revenue Scotland will consult prior to the publication of tax guidance and that, in line with the Digital First approach, information about how tax decisions are made, will be placed on-line. Revenue Scotland intends to use its website to provide up-to-date information in a way which is responsive to the needs of taxpayers and their agents.

3.50 The consultation asked:

Question 5: How and in what forms should Revenue Scotland provide information to, and communicate with, taxpayers and their agents?

3.51 Eighteen respondents (64% of all respondents) addressed this question.

Table 6: Respondents to Question 5

Category	No.	%
Tax accountants and professional tax bodies	8	44
Public bodies	2	11
Legal professional bodies	2	11
Local authority bodies	3	17
Business	3	17
Total	18	100

3.52 The prevailing theme was one size does not fit all. Two respondents (Tax, Bus) argued for the development of a communication strategy to help to ensure a tailored approach is established to address the distinct requirements of different stakeholders. It was generally felt that communication should be provided via a range of channels both digital and otherwise. Three respondents (Tax, Tax, Bus) highlighted the need to cater also for taxpayers with visual impairments and those for whom English is not their first language. One suggestion (Tax) was for information to be provided at two different levels: basic, explanatory; and more detailed and technical.

3.53 Three issues dominated responses:

• Digital First approach
  Whilst there was much support for a "Digital by default" approach on the grounds of wide reach and enabling access, a recurring theme was that this should not inadvertently exclude those without internet access (e.g. taxpayers without access to computer; broadband; IT knowledge). Comments included:
  "...it is important that 'digital first' does not reduce transparency and engagement in taxation decisions" (South Lanarkshire Council)
  "...do not support a policy of 'online everything'" (ICAS)
  Some legal and tax professionals urged that to maximise the effectiveness of a digital approach, it will be important to ensure information updates are made timeously, out-of-date guidance remains accessible by being archived chronologically (perhaps date-stamped), and information is readily searchable. One suggestion (Tax) was for e-learning modules to be developed to assist taxpayers and their agents.
• Telephone helpline
  The overriding view (from tax professionals, public bodies, legal professional bodies and local authorities) was that the new tax authority should be supported by a telephone helpline, the operation of which should take on board best practice from elsewhere. A key theme was quality of service, which respondents felt could be achieved by appropriate resourcing, staff training and named/dedicated operators. One respondent (Tax) called for minimum standards to be set. One public body considered that a single point of telephone contact for businesses, especially companies with multiple sites, would help with consistency. One respondent expressed their view:
  "Telephone help lines with appropriately trained personnel should be available, including dedicated help lines for agents. Many HMRC help lines use non-specialist staff working to a script, and we believe this has been a false economy" (Brodies LLP).
• Email communication
  Whilst many respondents acknowledged that there are security issues associated with communication via email, the consensus was that it is worthwhile addressing these to establish emailing as a secure channel for day-to-day communication between Revenue Scotland and taxpayers/agents. Suggestions were that until such a time, emails could be used by taxpayers and their agents to contact Revenue Scotland with queries, or for the new tax authority to issue standard notices, reminders and acknowledgements.

3.54 Other forms of communication suggested by respondents were:

• social media (although security risks should be dealt with first) (8 mentions)
• texting (7 mentions)
• regular newsletters (2 mentions)
• post for people without email or internet access (2 mentions)
• textphone (1 mention)
• text relay service (1 mention)
• home visits where enhanced support is required (1 mention)