Tax policy and the budget – a framework for tax: consultation analysis

1. Executive Summary

On 31 August 2021, the Scottish Government launched 'Tax Policy and the Budget – a Framework for Tax', a consultation that sought views on our overarching approach to tax policy, through Scotland's first Framework for Tax, and how the Scottish Government should use its devolved and local tax powers.

While the short-term view of tax policy is pivotal, the Scottish Government also understands the importance of looking further ahead in relation to tax policy making. This is why, in addition to the role of tax policy at the Scottish Budget 2022-23, we also invited views on tax priorities for the duration of the current Parliament (2021-26) and our first Framework for Tax.

The consultation closed on 26 October 2021 and received 47 responses. Of those, 22 were from individuals and 25 were from organisations. A list of respondents and links to their responses is available in Annex A. We would like to express our sincere thanks to those that submitted a response to the consultation.

The responses to the consultation have informed policy development in relation to the Scottish Budget 2022-23, and the development of a finalised Framework for Tax. In addition to the consultation responses included in Annex A, Scottish data on public attitudes to, and knowledge of, tax is available in Annex B.

Summary of responses

The consultation contained three questions which can be broadly separated into two categories:

• Tax strategy – views on the draft Framework for Tax.
• Tax policy – views on policy priorities for the Scottish Budget 2022-23 and Parliamentary Session (2021-26).

Tax Strategy: Framework for Tax

The draft Framework for Tax received positive feedback from a wide range of respondents, and was particularly welcomed for its accessibility, commitment to engagement and its contribution to improving the transparency of Scottish tax policy. Responses outlined a strong appetite to make the most of existing powers, and to ensure a solid foundation is in place for good practice in tax policy making.

Links between different levels of government remain important, with respondents highlighting the need to ensure that the responsibilities of local authorities and the Scottish and UK Governments, as well as fiscal cycles, are clearly articulated.

Tax Policy: Priorities for the Scottish Budget 2022-23 and Parliamentary Session (2021-26)

Respondents expressed a mix of views on how the Scottish Government should use its tax powers moving forward. Some respondents called for stability while we recover from the impact of the Covid-19 pandemic, and an alignment with UK tax rates. Whereas other respondents called for a more progressive approach to tax, in particular in relation to Income Tax and Council Tax rates.

The climate emergency was another common theme in the consultation responses. Many respondents included suggestions on how tax policy could be used as a tool to encourage sustainable behaviours. For example, encouraging people to buy electric vehicles by making them cheaper, or by increasing the cost of petrol or diesel vehicles.

Multiple organisational responses also called for a phased approach to increasing Non-Domestic Rates back to their pre-pandemic level, particularly for sectors that have been most affected by the pandemic.

Additionally, the importance of strong intergovernmental relations between local, Scottish and UK Governments was highlighted in many responses. Some respondents also highlighted the risks associated with any significant divergence in the tax policies across the four nations of the United Kingdom, for example, creating additional competition and increased administrative pressures on businesses that would need to accommodate different rates.

Furthermore, a significant proportion of respondents emphasised the importance of having simple, transparent and easy to use tax systems to avoid confusion or accidental non-compliance.

Tax Policies – Public Attitudes and Awareness

Over the past 12 months, the Scottish Government worked with YouGov to collect information about public attitudes towards, and knowledge and awareness of tax policies.

The data collected in this research indicates that a majority of people in Scotland agree that the government should redistribute income from the better off to the less well off, with four in ten people also saying that they would be prepared to pay more taxes themselves to fund public services.

Furthermore, the evidence suggests that public understanding of tax policies has decreased over the past 12 months and that most people access information about tax from (UK or Scottish) government websites. Additional information about this research can be found in Annex B of this report.

About the analysis

As with all consultations it is important to bear in mind that the views of those who have responded are not representative of the views of the wider population. Individuals (and organisations) who have a keen interest in a topic – and the capacity to respond – are more likely to participate in a consultation than those who do not. This self-selection means that the views of consultation participants cannot be generalised to the wider population.

For this reason, the approach to consultation analysis is primarily qualitative in nature. Its main purpose is not to identify how many people held particular views, but rather to understand the full range of views expressed.

Next steps

In developing the Framework we have demonstrated our commitment to open government and transparency. It embodies our approach and ambition for excellence in tax policy and delivery. We are incorporating feedback from all responses that have been received to this consultation, and continue to seek input from as wide a range of stakeholders as possible. This ensures that our work is genuinely co-produced.

Moving forward, we will continue to collaborate with stakeholders through public messaging, events and consultation when developing policy to increase understanding of, and participation in our approach to tax policy.

Responses to the consultation have informed policy development in relation to the Scottish Budget 2022-23, and will continue to inform our approach for this Parliamentary session (2021-2026). Additional analysis of the information received in response to this consultation can be found below.