Scotland's Tax Strategy: Building on our Tax Principles

Annex C - Areas of Research Interest and Research Questions

Our research questions on tax ensure that our policy and analytical priorities are aligned over the medium-term. In setting these questions, we seek to understand the current tax landscape but also to consider future challenges and opportunities.

This Annex sets out the strategic questions which we expect to inform our programme of evidence and evaluation over the next five years. We are actively seeking collaboration and input from the broader research community to ensure our policy is based on the very latest research. By collaborating on research and evidence, we can make sure our policies are well-informed and robust, but also innovative and forward-looking.

It is essential to understand the full and cumulative impacts of our tax policy decisions and therefore our first ARIs are focussed on enhancing our evidence base in this area.

We welcome the expertise from the research community to support us to take this forward.

1. To understand the overall tax system in Scotland and its interactions with UK and broader policy systems

• How may the Scottish tax base change in the future, for example, due to Scottish and UK Government policy changes, economic shocks, and longer- structural changes?
• How could the balance of taxes be optimally managed across the whole system, considering individuals, households and business?
• What are the impacts of the interactions between the tax system and broader policy systems e.g. social security and labour market?
• How does the Scottish tax system compare to other relevant countries, and what lessons can be learned to improve tax outcomes for example on revenue, behaviour, and redistribution.
• How can the Scottish Government best support taxpayers to understand the tax system and obligations?

2. Behaviour change and tax policy, including distributional impacts

• What is the scale of behavioural effects to tax policy changes across the economy, and how do these vary by tax?
• What are the most impactful types of behavioural responses over the short and longer term e.g. labour supply, tax planning, and migration?
• How do marginal and average tax rates impact behaviour change at a devolved and cumulative level e.g. combined with reserved tax policy?
• How does compliance, and taxpayers’ perception of compliance, affect behaviour?
• What are the best ways to design systems and policy to minimise fraud and error in Scotland, while maintaining excellent and accessible services?

3. Tax and economic impacts

• How, and to what extent, do different taxes and policy decisions impact business confidence and competitiveness of the economy?
• What is the optimal tax mix across different taxes to maximise efficiency/reduce economic distortions?
• What economic interventions have the biggest impact on the tax base, and revenues?
• Based on international examples, what are the key factors to support a growing economy and tax base?
• Based on international evidence, what is the optimal balance between tax and fiscal policy as opposed to regulation changes or other alternatives to achieve economic outcomes, e.g. economic growth/productivity?
• What are the longer-term impacts of tax policy on the economy?

4. The Role of Tax in the Environment

• How might the transition to a net zero economy affect the tax base in Scotland?
• What are most effective tax and fiscal levers to drive behavioural change to support our environmental objectives, in particular relating to net zero?
• Based on international evidence, what lessons can be learned about the appropriate balance of local, national and supra-national fiscal environmental measures?

5. Local Government Taxation

• What lessons can we learn from other countries about the balance between local and national taxes?
• How do other countries use property taxes and how have success reforms to these been delivered?