Tax Advisory Group minutes: February 2024

Attendees and apologies

• Shona Robison MSP, Cabinet Secretary for Finance and Local Government
• Dr. Jim McCormick, Chief Executive of the Robertson Trust
• Cllr. Katie Hagmann, COSLA Resources spokesperson
• Aidan O'Carroll, Chair of Revenue Scotland and former Chair of the Institute of Directors in Scotland
• Prof. David Heald, Emeritus Professor in the Adam Smith Business School, University of Glasgow
• Prof. Mairi Spowage, Director of the Fraser of Allander Institute
• Dr. Liz Cameron, Chief Executive of the Scottish Chambers of Commerce
• Dan Neidle, Founder of Tax Policy Associates and former tax lawyer
• Stuart Adam, senior economist at the Institute for Fiscal Studies

Scottish Government

• Lorraine King, Deputy Director, Tax and Revenues

Apologies

• Tom Arthur MSP, Minister for Community Wealth and Public Finance

• Dave Moxham, Deputy General Secretary at the Scottish Trades Union Congress
• Charlotte Barbour, Director of Regulatory Authorisations at the Institute of Chartered Accountants of Scotland and Deputy President of the Chartered Institute of Taxation

Items and actions

Welcome and apologies 

The Chair welcomed members and noted apologies from Charlotte Barbour and the Minister for Community Wealth and Public Finance. Dave Moxham was not in attendance. 

The Chair set out the agenda for the meeting. 

Minutes of last meeting – (Minutes paper)

The Chair asked members to confirm if they were content with the minutes of the previous meeting. Members were content. 

The Chair reminded members that, with the Terms of Reference agreed, a page about the Tax Advisory Group would be published on the Scottish Government website. This would host the Terms of Reference and minutes. 

Discussion: Tax Strategy & strategic context (Paper 1)

The Chair invited the Scottish Government policy lead to present a summary of Paper 1. The presentation set out a summary of the Strategic context and a number of discussion questions for the group.

The Chair emphasised that there was a lot of ground to cover and that the group should aim to surface issues, rather than attempt to fully solve the issues presented. The Chair also highlighted the complexity of the hybrid system of reserved and devolved taxes and the interactions with local taxation, noting a cross-party desire for reform in this space. 

There was a discussion around the impact of fiscal drag and behavioural  effects in income tax revenues. As well as the different forecasting methodology used by the Scottish Fiscal Commission and Office for Budget Responsibility on revenue projections.  

The impacts of marginal rates were discussed, and it was suggested that the impacts on the labour market of tax changes should be more closely examined, particularly for those on middle incomes, and any marginal decisions they make regarding hours worked or taking promotions. 

It was suggested that a strategic framework to support tax policy decision making may be useful. 

The Chair noted the point on marginal rates and decision making and suggested further work was needed to understand if tax was the primary driver here or if, for example, pay differentials were also a factor. 

The role of data and evidence was discussed. It was noted that more analytical input to this group, particularly hard data, would be useful to inform discussion. It was emphasised that trend data would be particularly useful rather than relying on snapshots.

It was suggested that robust agile data and surveys be considered, particularly around groups sensitive to tax changes. It was further noted that middle earners, forming the bulk of the tax base, should be considered in this context, to improve understanding of their behaviour.

The importance of including business groups was highlighted, particularly in the context attracting workers to Scotland. Also the need to understand the extent to which tax changes may impact on business considering inward investment in Scotland. 

It was suggested that independent survey research with business groups be conducted, to better understand this context, and that this could be done on a regular basis to generate a robust set of data.

The Chair welcomed the suggestion and requested that officials take this as an action

Action: Officials to work with business groups to develop independent survey research on impacts of tax changes and competitiveness.  

Local Government funding and taxation was discussed. It was noted that Council Tax benchmarking data exists, going back to 2010 and can be shared with this group. There was some debate about the degree to which Non-Domestic Rates are a local tax, but regardless it was noted that it forms a significant part of local government revenue. 

It was highlighted that a systemic view considering the full tax and economic landscape was essential, particularly how devolved levers can be used to support economic growth. It was further noted that evidence in itself is not the only consideration, how that evidence was used to inform policy is as important. 

The Chair summarised the discussion, noting that the value of this group was in providing a longer term view (5-10 years) of the impacts of economic and tax policy decisions, underpinned by a robust evidence base.  

The Chair thanked members for a productive discussion and noted that two official led workshops were planned to discuss the Strategy in more detail. 

Discussion: Stakeholder and citizen engagement (Paper 2)

The Chair invited the Scottish Government policy lead to present a summary of Paper 2. The presentation summarised the rationale for engagement and building understanding. It also highlighted some existing data gathered in this area. 

The Chair invited members to share their views. 

Public understanding of the Scottish tax system was discussed. It was noted that engaging the general public in this space was challenging. If knowledge of the system is low, it is difficult to have an informed discussion. 

It was suggested that public understanding is not as high as the YouGov data indicates. Perhaps because questions are based on the abstract rather than specifics of the tax system. It was suggested that, for example, questions on tax thresholds and marginal rates may present a more accurate picture of people’s understanding. 

It was noted that there was a need to improve public understanding of both the tax system and the connection between tax and public services of all kinds. As well as identifying any links between improving public understanding of tax and behavioural changes. 

It was noted that, post-pandemic, evidence had suggested that there has been a significant drop in trust in both government and institutions across many countries. It was highlighted that engagement in this context needs to be carefully considered to ensure that communication is both two-way and within trusted platforms.

It was suggested that a small number of high quality discursive engagement with the public is conducted, to track views over time, rather relying on annual surveys. It was noted that if better information and context is provided to the public then more informed responses are generated. This did not necessarily mean holding a citizen assembly, other models exist. 

The Chair summarised the discussion and noted that officials will develop this work further, considering the best methods for each type of public engagement. 

Action: Drawing on existing and potential sources of evidence and methodology, officials to develop a public engagement plan for discussion with the group at a later meeting. 

Discussion: TAG Workplan (Paper 3)

The Chair noted that the previous items had run longer and suggested this item be conducted via correspondence. The group was content with this approach.

Actions: Officials to circulate workplan and discuss with members via correspondence. 

AOB

The Chair was asked if papers for these meetings could be shared beyond the group. The Chair advised that whilst the group’s minutes would be published, the papers were for internal discussion and should not be more widely shared. 

The Chair noted the next meeting was 15th May and reminded members to contact the secretariat if they wished to attend the Scottish Government official-led Strategy workshops.