Smith Institute (Seminar)
Item 2 is my report to the committee on the Smith Institute's fair tax seminar, which I attended on the committee's behalf. The seminar was the first in a series on what a fair tax system is.
The Smith Institute describes itself as an educational charity that strives to ensure that as many people as possible better understand the process of policy formulation. It works with partner organisations to identify where the most relevant and recent research is being undertaken on a particular topic then presents it as part of a seminar series. Its publications are publicly available.
At the seminar, a panel discussion was followed by an open question time and general discussion among a large group of participants. To give members an idea of it, the panel participants came from academia, industry, finance, commerce and the media. For example, there was the chairman of the United Kingdom small business committee of the Association of Chartered Certified Accountants; a director of the Institute for Fiscal Studies; the governor of the National Institute of Economic and Social Research; a professor of taxation law; and a senior fellow of the Hudson Institute who was also a former principal adviser to the Chancellor of the Exchequer. The audience members represented a massive range of economic, political, legal and other organisations. I have given this information to the committee clerk, along with the Smith Institute's publications list.
The discussion was high level, but it was presented in a lively and informative way. I will give members a flavour of it. My notes show that the taxation issues discussed ranged over the fairness of distribution, redistribution and process—including the practical effects of tax methods—philosophy, participation, consultation and self-interest. A professor of taxation law even analysed the problems of tax avoidance and the Government's role in encouraging or discouraging taxpayers' behaviour.
We considered equity and efficiency in taxation policy principles, which can sometimes pull in opposite directions, as well as difficulties with collection costs, tinkering and complexity in taxation systems. We also considered transparency, hypothecation and the problems of using taxation to change behaviour, raise revenues and achieve Government objectives, as well as the need to inform the electorate better about how and on what its taxes are disbursed at central Government level. An obvious fact that emerged was the complexity of UK central Government taxation and the problem of defining and introducing fairness as a guiding principle.
I encountered a problem that was similar to the one that was mentioned earlier, which was the lack of available literature that could be of practical help to our committee. I pursued that problem with panel members and I can report that they have provided suggestions that, I hope, will prove helpful to all of us in our work.
Another aspect that will be followed through is that the institute will be in touch with our committee adviser and the clerks to ascertain whether it can be of specific help to our committee in its work. I think that some useful contacts have been established.
I will leave all the literature with the clerk so that committee members can see it. I am frightened to ask for questions, because you may expect answers on this difficult subject. However, it will be of importance to us, and we can hone our skills as and when required.
I am sorry, because I was slightly late coming in and I missed your initial comments. However, do you perceive that there is a need for more research on taxation?
The topic was fairness in the taxation system. The Scottish Parliament's taxation powers are limited, but we do have the council tax and alternatives to it have been proposed. There can be a useful discussion on how we can make any taxation in which we are involved as fair as possible.
There were a whole host of issues, some of which I have already mentioned, about the process and practical effects of tax. Examples were given to demonstrate that in trying to achieve one objective, tax can sometimes achieve the very opposite. It quickly emerged from what the experts said during the seminar that the subject is very complex.
Is the UK Government undertaking any active research into different tax systems and so on?
I have brought back the list of attendees, and they included representatives of political parties. The Smith Institute was, of course, established by Gordon Brown when Chancellor of the Exchequer. The contacts are available, and Government does listen to what the institute says.
The Smith Institute exists for educational purposes and to encourage debate on the practical effects of various policies, including those on taxation. I will leave the papers for members to peruse afterwards.
Thanks for your detailed report, convener. Was there any discussion about the impacts of central taxation versus those of local taxation?
No. Clearly, however, we could follow through on that issue. I spoke to a representative of the Smith Institute who expressed great willingness to explore ways to encourage debate or inquiry in the Scottish Parliament to assist this committee. The institute will be contacting our adviser and clerks to establish how to explore the subject further. The institute focuses on UK central Government, but it is willing to explore whether it can assist the committee in some discussion areas.