Devolved taxes: a policy framework - consultation analysis

3. Approach to Engagement and Consultation

In establishing the Devolved Taxes Policy Framework, our aim is to build on our reputation for good and effective engagement with stakeholders and encourage wider and more meaningful engagement on tax policy matters. Therefore, the consultation set out proposals for a more strategic and open approach to engagement and consultation, and to the provision of information around the fully devolved taxes.

3.1 Question 1: Do you welcome the use of the DTC as an annual tax forum and agree with its stated purpose?

The consultation paper proposed the re-introduction of the Devolved Tax Collaborative (DTC), an annual event to bring together the tax advisory community and others with an interest in tax to discuss the Scottish Government's future tax policy priorities and the effectiveness of the tax system.

The majority of respondents were supportive of the re-introduction of the DTC. The Caithness Chamber of Commerce noted that early engagement with stakeholders is key and some respondents suggested that different branding and good promotion may widen the appeal and participation in such an event. In addition, eight of the responses mentioned the continued need for Revenue Scotland's LBTT and SLfT fora, to address the operational aspects of the individual devolved taxes.

3.1.1 Purpose and content

Some respondents suggested that there was a need to clearly define the purpose and scope of a DTC type event. The Association of Taxation Technicians (ATT) recommended a "clear agenda, circulated in advance, that clearly identifies the gap that the DTC is intended to cover", and PricewaterhouseCoopers stated that members would need "sufficient detailed information on the impact, effectiveness, and cost of tax proposals for their views to be meaningful". Responses on the content of a DTC suggested having a wide policy remit including new taxes, policy priorities and the performance of current taxes.

3.1.2 Frequency

Some responses suggested that more than one event may be necessary over the course of a year, for example if new taxes were to be introduced. In addition, ICAS proposed utilising an ongoing "review and reflect process", in order to take account of events throughout the year.

3.1.3 Participation

In terms of participation in such events there was some concern from respondents that accessibility and geography could be an issue. The Caithness Chamber of Commerce stated that "it is important that the views of stakeholders in every region of Scotland are captured". The issue of geographical representation was also highlighted at the events held in conjunction with this consultation in Aberdeen and Inverness. The Scottish Council for Voluntary Organisations (SCVO) recommended using "digital platforms and more participative approaches to service design", to overcome these issues.

Overall, the majority of respondents encouraged wide ranging engagement at such events, with the Scottish Human Rights Commission (SHRC) suggesting that they should be used to reach those whom "are often excluded from key decision making processes".

3.2 Question 2: Do you have any other preferences as to how the Scottish Government should carry out engagement on the fully devolved taxes?

The majority of respondents answered this question, with many supporting wide engagement on tax matters.

3.2.1 Who to engage with?

ATT, ICAS and CIOT were positive about the constructive and regular engagement the Scottish Government has with professional bodies, and noted that their members appreciate this type of engagement. Other respondents suggested more engagement with independent bodies, academia, think tanks, local chambers of commerce, the FSB and the CBI.

Going beyond businesses, industry and professional bodies, some respondents wrote of the need to engage people and communities. For example, the Quakers of Scotland stated:

"Quakers in Scotland believe that tax is a fundamental lever to create a more equal and more just society, and as such it is imperative that the range of stakeholders consulted are reflective of society and represent communities of all identities as well as geography."

3.2.2 How to engage?

Beyond using the DTC, some respondents proposed other methods of engagement. LSoS stated that social media should be used to communicate "changes to or important messages about the devolved taxes", and that more information should be available online as this is where many people access information about tax. At each of the events held alongside this consultation, the attendees also suggested that much more could be done to improve the provision of information for both professionals and the public and to promote events via social media.

In addition, CIOT and the Low Incomes Tax Reform Group (LITRG) highlighted the difficulty of reaching the general public and unrepresented taxpayers directly, and suggested that the Scottish Government could work with charities to reach broader audiences, and even use "simple online polls and surveys". SCVO proposed a budget portal where citizens can engage with budget and tax proposals directly. The SHRC stated that due to the complexity of the subject:

"Facilitating meaningful engagement with those who have relevant lived experience of the impact of decisions on taxation and those who are perhaps not as familiar with the subject matter requires thoughtful consideration and resources."

On the point of meaningful engagement, one respondent highlighted that engagement is a two way process, and beyond providing sufficient information the Scottish Government must also accept the feedback provided. The Quakers of Scotland expanded on this point stating that:

"True engagement and listening to what is being said are essential for citizens to feel ownership of policies which affect the distribution of wealth and resources."

3.3 Question 3: Do you support the Scottish Government's proposed approach to tax consultations, in particular consulting on issues collectively rather than on an individual basis?

The consultation set out a proposal to consult on issues collectively, rather than on an individual basis. This means that one consultation could be published per policy and legislative cycle, to gather views on all of the tax measures being explored at that time.

There were some positive comments about incorporating consultations into the policy cycle. For example, professional bodies stated that this would inform stakeholders as to when to engage with the Scottish Government and allow them to plan and resource their input.

There were mixed views on whether issues should be consulted on collectively or individually, and some suggestions were proposed as to how issues should be grouped for consultation.

3.3.1 Collective vs individual consultation

Arguments for consulting on issues collectively included: encouraging working across portfolios, to avoid unintended consequences and aid the examination of the cumulative impact of tax. Additionally, Homes for Scotland suggested that collective consultation offers the opportunity to include different sectors on general tax reform.

From the perspective of respondents to consultations, it was suggested that it is helpful to view all proposals together and the Caithness Chamber of Commerce suggested that it "would significantly reduce the administrative burden", as they often gather views of members before responding to consultations. In addition, SCVO, the Quakers of Scotland and Revenue Scotland all suggested that consulting collectively would avoid "consultation fatigue".

On the other hand, CIOT and LITRG stated that collective consultation may "place significant time pressure on certain stakeholders". They also stated that incorporating all issues for consultation in one document could be "unwieldly" and may put off respondents. Other professional bodies agreed that despite being more practical, where all matters in a consultation are not relevant to a particular stakeholder, they may be less inclined to respond. Some respondents also suggested that having only one consultation per cycle risks individual issues not receiving adequate engagement, time and resource.

Some respondents also stated that they have a preference for both individual and collective consultations where appropriate, depending on the tax changes involved.

3.3.2 Grouping issues for consultation

CIOT and LITRG stated that it is unclear whether the proposal in the document is to group all issues for consultation into one document, or to issue separate consultations for each tax. ICAS also suggested that the topic under consideration may dictate the method of consultation. For example, where an issue is sector specific, such as SLfT, an individual consultation "may be more effective".

ICAS also proposed that a distinction should be made between "policy consultations and consultations on draft legislation". Some other respondents, including the LSoS, Scottish Land & Estates, Historic Houses, ATT and PricewaterhouseCoopers also make this distinction. PricewaterhouseCoopers stated that these types of consultation require different forms of "engagement and timing".

ICAS stated that:

"There is likely to be a more diverse range of stakeholders with an interest in, and contributions to make to, policy considerations, whereas draft legislation may be of interest to a more limited number of interested parties such as the professional bodies and their members."

Some respondents explicitly supported consultations on draft legislation, for example ATT stated that it can reduce the need for future amendments and unintended consequences. Furthermore, the LSoS suggested that:

"In the event that there is limited opportunity for Parliamentary scrutiny of legislation, consultation with stakeholders on draft legislation in advance of its introduction to the Parliament may be of particular benefit."

3.4 Question 6: Do you consider the existing documents that are published, and the Scottish Government's approach to drafting them, as a sufficient means of clarifying the intention and impacts of a policy?

An important part of the approach to engagement on the devolved taxes is transparency and accountability. Part of this is fulfilled via the documents published alongside legislation, to provide detail on policy intention and impacts. One individual respondent stated:

"By publishing the expected impacts on equality, business, regulation and data protection, along with supporting evidence or documents, this will bring transparency to the expectations of The Scottish Government and, hopefully, allow any questions, contradictions or opposition to be tabled in response."

Some respondents highlighted the quality of documents produced by the Scottish Government to accompany legislation to date. Additionally, ICAS stated that the publication of 'The Role of Income tax In Scotland's Budget' was an approach that is "highly recommended" for substantively new or contentious proposals.

3.4.1 Accessibility

In terms of the accessibility of these documents the SHRC stated that:

"[T]hese supporting documents should also be fully accessible to all in order to support participation. This means making all documentation available in alternate forms (on and offline) including easy read, BSL etc."

ICAS stated that:

"There are a number of different audiences for Scottish Government publications on tax, its policy intentions and impacts, and each audience may have differing needs."

Some respondents also suggested that simple and summarised versions of complex information and documents should be published and shared widely.

3.4.2 Content

For the content of such documents, some respondents suggested that the rationale for change, the impact on peoples' outcomes and where priorities and principles have been balanced must be explained. Additionally, some respondents encouraged the full publication of any research and data that informs policy decisions, to increase transparency and accountability. The SHRC also suggested that there should be a focus on "tax avoidance (and evasion)" in the documents.

Overall, there was support for full and detailed documents to aid the engagement with and the effectiveness of the legislation. The LSoS stated that "the more detail which can be given about the policy intention of legislation, the more likely it is that the legislation will be effective and robust". Some also proposed that any post-implementation review can assess the outcomes and impacts of a policy against the initial assessments and documents.

3.4.3 Business and Regulatory Impact Assessments

Some respondents argued that Business and Regulatory Impact Assessments (BRIA) frequently need more consideration and should be published alongside evidence and available data.

3.4.4 Financial Memoranda

In relation to the Financial Memorandum, Audit Scotland suggested that it may be appropriate to set out any significant "changes in taxpayers' behaviour in response to a policy change" alongside expected financial costings. They also highlighted the importance of setting out any "forecasts of the revenues alongside forecasts of their [block grant adjustment]". CIOT and LITRG highlighted that amongst their members there is a concern over "whether the sources of data are always adequate". They also proposed that the forecasts within Financial Memoranda should be "carried out independently of Scottish Government, that is, by the Scottish Fiscal Commission (SFC)".

3.4.5 Equality Impact Assessments

Audit Scotland stated that Equality Impact Assessments should set out where analysis is not available and detail what this means for understanding the impact of tax proposals. SCVO and the SHRC both support the Scottish Government undertaking a Human Rights Impact Assessment, in addition to or in conjunction with the Equality Impact Assessment. The SHRC stated that:

"Given that tax revenues are the main source of income for governments to facilitate the execution of their legal obligations to protect, respect and fulfil human rights and therefore the key role of taxation policy – the Commission would argue of the critical importance of a human rights impact assessment."

There is no legal requirement to complete a human rights impact assessment. However, when introducing or amending legislation there is a requirement to carry out an analysis of human rights and this is included in the policy memorandum.