Scotland's Tax Strategy 2024: consumer duty assessment

Scotland’s Tax Strategy 2024: Consumer Duty Assessment

The Scottish Ministers are specified as a relevant public authority under the Consumer Scotland Act 2020 (Relevant Public Authorities) Regulations 2024 (SSI 2024/78). This means that the Scottish Ministers are subject to the consumer duty (“the Duty”) under the Consumer Scotland Act 2020 (“the 2020 Act”) and must therefore comply with the four requirements of this duty, which are:

• When making decisions of a strategic nature about how to exercise their functions, to have regard to the impact of those decisions on consumers in Scotland;
• When making decisions of a strategic nature about how to exercise their functions, to have regard to the desirability of reducing harm to consumers in Scotland;
• To publish information about the steps they have taken to meet the Duty; and
• To have regard to any guidance published by Consumer Scotland about the Duty.

The Duty ensures consumers are at the heart of all strategic decisions within the Scottish Government. Under the 2020 Act, the definition of consumers includes individuals and small businesses who buy, use or receive in Scotland goods or services (or who could potentially do so) which are provided by public bodies or supplied by a business.

As with similar publications of its type, Scotland’s Tax Strategy (the “Tax Strategy”) collectively constitutes a ‘strategic decision,’ even if each of the various policies contained within it do not. The approach taken to meet the Duty considers the impact of the constituent elements as well as the cumulative impact of the Tax Strategy.

The Tax Strategy has met the requirements of the 2020 Act. The following impact assessment has been carried out:

Stage 1 – Planning:

1. Is this a decision of a strategic nature? Yes

The Tax Strategy began development following the commitment set out in the Medium-Term Financial Strategy (MTFS) 2023^[1]. Following this, Scottish Government developed a comprehensive plan, which included a two phased stakeholder engagement plan.

The Tax Strategy was originally intended to be published as a draft for consultation; however, due to the change in Scottish Government First Minister in May 2024, followed by the UK General Election in July 2024 and Scottish Government’s legal obligations around that period, this was not able to occur before the Scottish Parliament 2024 summer recess.

As such, it was decided that the Tax Strategy would be published as a final document alongside the next fiscal event (2025-26 Draft Scottish Budget) and that this would be supported by a full programme of external stakeholder engagement over the period of August-October 2024, in lieu of a consultation.

2. Is the strategic decision likely to have an impact on any/all consumers? Yes

Stage 2 – Evidence Gathering:

3. What is the proposal trying to achieve?

In 2023, the Scottish Government published its Medium-Term Financial Strategy (MTFS)^[2], which outlined our three-pillar approach to ensuring that the public finances are on a sustainable trajectory. The Tax Strategy delivers on the pillar “to maintain and develop our strategic approach to tax”, sitting alongside pillars that focus spending decisions on Government priorities and prioritise economic activities to broaden the tax base.

The Tax Strategy sets out our medium-term ambitions for how the tax system should develop to support the delivery of our four government priorities: eradicating child poverty, growing the economy, tackling the climate emergency, and ensuring high quality and sustainable public services.

The actions set out in the Tax Strategy build on the principles outlined in Framework for Tax^[3]. They will support the progression to a tax system which aligns policy aims with outcomes, is informed by robust evidence and engagement with others, and enables us to take a system wide and comprehensive approach to tax policy in Scotland.

These will be prioritised around five areas:

• Priorities for the Existing System.
• The Economy and the Tax System.
• Administration of the Existing Tax System.
• Evidence and Evaluation.
• Future Priorities.

Process to gather evidence

Following the commitment in the 2023 MTFS, the Tax Advisory Group (TAG)^[4] was established, and met for the first time in July 2023. TAG provided feedback and advice throughout the development of the Tax Strategy with respect to improvements to the existing tax system, future priorities and evidence and evaluation programmes.

Officials gathered evidence and analysis from a review of externally published reports and internal analysis and through the programme of external stakeholder engagement.

4. What are the impacts on consumers?

Evidence gathered by the Scottish Government suggests that the Tax Strategy will result in a positive impact for taxpayers in Scotland. Stakeholders highlighted during engagement that there are associated impacts for low-income groups with regards to in work progression due to tax literacy and administration, as such the Tax Strategy may have a more positive impact on these groups.

The strategic decisions set out will ensure that consumers are able to view the tax policymaking process with greater transparency and understanding, as well as being able to engage with the Scottish Government and Scottish Ministers in a more systematic manner.

As part of the Tax Strategy implementation, there will be programmes of work focussed on improving public understanding of tax and better communication of the tax system. This will enable taxpayers to make more informed decisions in terms of their tax planning and increased understanding of how tax revenues are used to fund public services.

Enhancing our evaluation, evidence and engagement on tax, as set out in the Tax Strategy will ensure that decisions made by Ministers fully consider the trade-offs and concerns of stakeholder groups.

5. Is it likely that harm will be experienced by consumers as a result of this proposal?

Scottish Government believes it is unlikely that harm will be caused by the actions set out in the Tax Strategy, or its implementation.

6. What alternative proposals are there that can improve outcomes for consumers and/or reduce harm to consumers?

A decision could be made to not publish the Tax Strategy.

7. How do these alternative proposals compare to the original proposal?

During stakeholder engagement, certain stakeholder groups identified that the achieving greater certainty and stability on future tax policy intentions would be beneficial to their organisations, and as such a decision to not publish a Tax Strategy may result in further harm.

As such, given that the Tax Strategy is unlikely to cause harm, and has the potential to have a positive impact, it is appropriate to proceed with the Tax Strategy and its intended outcomes.

Stage 3 – Assessment and Improvement of Proposal:

8. What is the expected impact of a strategic decision on consumers in Scotland?

It is expected that the impact of the Tax Strategy will be positive for consumers. Improvements to transparency, administration and tax literacy for the taxpayers in Scotland will enable them to better understand their tax position for personal tax planning.

9. Has SG had regard to the desirability of reducing harm to consumers in Scotland?

Yes – Improvements set out which aim to improve tax literacy and understanding of tax for taxpayers and citizens in Scotland will enable them to better plan their tax affairs, and this could support increased understanding of reliefs for which they are eligible where appropriate. This will have the effect of reducing harm to consumers in Scotland.

Stakeholders, including the business community, welcomed the aims and objectives of the Tax Strategy, and highlighted it would be beneficial to them.

10. Is there a need for further engagement with consumers?

A comprehensive programme of engagement was put in place from August 2024 to November 2024 in lieu of having a public consultation as originally planned. The varied formats of these engagements e.g. roundtables, 1:1, more focussed themed discussions, enabled a broad and detailed period of evidence generation to inform the direction of the Tax Strategy.

Further engagement will be needed, and is planned, following the publication of the Tax Strategy as it is implemented. The Scottish Government is due to publish a progress update in 2026.

Stage 4 – Decision:

11. Has SG met the Consumer Duty for this decision? Yes

12. If yes to above, explain how?

In the process of carrying out this impact assessment, the cumulative package of policy intentions and programmes of work included in the Tax Strategy have been examined for potential impacts on consumers in Scotland. This was achieved by significant engagement with stakeholders throughout the development of the Tax Strategy.

This means that we have put consumer outcomes at the heart of our strategic decision making by having regard to the impact those decisions have on consumers and to the desirability of reducing harm to consumers.

Stage 5 – Publication and Review:

13. Section 23 of the 2020 Act requires relevant public authorities to publish information about the steps which they have taken to meet the Duty. The relevant public authority must publish the information no later than 12 months after the end of period to which it relates.

This statement will be published on the Scottish Government website (gov.scot) on 4 December 2024.

14. How will the process carried out be reviewed and evaluated?

Throughout implementation of the programmes of work outlined in the Tax Strategy, the Scottish Government will engage with consumers to seek their input on tax policies which affect them and subsequently seek feedback on the effectiveness of our engagement with them on those issues.