Scottish Aggregates Levy: evidence review and policy options

Northern Ireland Case Study

Scotland's land border with England has implications for both the enforcement of a Scottish Aggregates Levy and the impact of the Levy on quarry operators on both sides of the border. As such, it is pertinent to consider the lessons learned in Northern Ireland and the impact of a Levy there that did not apply in the Republic of Ireland. Here we present a brief background of the situation in Northern Ireland and the key implications for the Scottish Aggregates Levy, while the detailed analysis are presented in Appendix 5.

Prior to and following the introduction of the UK Aggregates Levy in April 2002, concerns were repeatedly raised that the levy would promote illicit imports to Northern Ireland from the Republic of Ireland. As a result, the Aggregates Levy Credit Scheme (ALCS) was introduced in Northern Ireland in April 2004, which enabled companies in Northern Ireland to claim an 80% relief on the levy, providing they met specified environmental conditions. However, the ALCS was suspended in December 2010 due to repeated court challenges lead by the British Aggregates Association (BAA).

As discussed in Appendix 5, there were a number of factors affecting Northern Ireland's quarry industry during this period (not least the recession, the relative strengths of the two currencies, the island's geology and the level of enforcement activity). As such, it is unlikely that Scotland would be affected to the same extent as Northern Ireland if Scotland were to have a different Levy to England, or that there would be the same risk of illegal activity.

Nevertheless, the experience from Northern Ireland indicates that any disparity between the Aggregates Levy in England and a new Levy in Scotland would create concerns that the market would be distorted. Scottish quarry operators would oppose a higher levy in Scotland on the grounds that they risk losing out to imports from England, while English operators would similarly seek to challenge a lower Levy in Scotland. This underlines the need to tax imports from the rest of the UK and beyond to Scotland at the same level as domestic quarry products and exempt exports. Similarly, it will be important for the industry to have full confidence in enforcement activity by the tax authorities in England and Scotland.