Chamber and committees

That is because it is about how one specific tax operates. The tax framework is designed to be a high-level and accessible document that will inform people and provide transparency on how we take decisions.

For example, if we were do a deep dive into the operation of the fiscal framework and block grant adjustments for income tax, it would necessitate doing the same across every single tax that is referred to in the tax framework. As such, the document would go from being a concise high-level document that seeks to provide clarity to being quite a dense one, which, ultimately, would not realise its stated purpose.

Of course, there is voluminous material on the operation of the fiscal framework. We set out income tax policy as part of the budget and we have a specific debate in Parliament on the rates resolution, so there is an opportunity for fuller consideration. We are transparent about how we engage with the UK Government on the upcoming review of the fiscal framework. I take the point, but, ultimately, if we went into huge detail in the document on the operation of the fiscal framework, it would start to lose its overall purpose.

Alex Doig might have an insight into what consideration was given, in the development of the tax framework, to what was included and what was not included, which might help to elucidate some of the points that I am trying to make.

As you will be aware, there was a review of business rates in England. Ultimately, that review recommended that England should start doing things that we are already doing up here, short of revaluation cycles, such as implementing something like the business growth accelerator. That is an example of a neighbouring jurisdiction that has considered the issue and did not land on a proposition that involved fundamental and wholesale reform.

We have made a manifesto commitment to consider an online sales tax. I appreciate that a request for that has been made by people who operate in the retail context, given the difficulties that our town centres and high streets have been facing. Various calls have been made to level the playing field—that is not language that I would use, but that is how it has been characterised by some stakeholders. However, we must also be cognisant of the work that the UK Government is doing in this area, as there is the potential for a UK-wide digital sales tax.

To go back to the original point about NDR, we have to get to the point of revaluation and let the Barclay review bed in. We are considering how we will respond to the key points that were identified by the Fraser of Allander Institute, but we recognise that having the data in place would allow a more informed discussion of potential options for further reform. What we are talking about is a first step.

This relates in the first instance to how the document itself—which I have described as a foundation document—was created. There was extensive consultation. There was a pre-consultation process with Revenue Scotland and other parties; we had the public consultation over September and October; and, following that, we had further engagement with stakeholders, including Revenue Scotland, to refine the proposals in the framework. As a result, the framework reflects that extensive engagement.

Let me give you one or two specific examples of our process of engagement. One of the commitments in the work programme relates to the additional dwelling supplement review, which is under way at the moment. We have undertaken a public consultation, which closed earlier this month, and we have also had significant engagement with stakeholders at official and ministerial levels, with a round-table discussion at the start of this month that I chaired. We will respond fully to that process during the summer.

That is an example of what is happening in one area. Another area of the work programme—and one that reflects the joint agreement between the Scottish Government and the Scottish Green Party—is council tax, with the establishment of a working group to look at deliberative processes, culminating in a citizens assembly to look at the resourcing of local government, including council tax itself. It is an example of engagement of the widest possible kind, and I hope that what I have said demonstrates the wide array of ways in which we are taking forward our commitment to transparency and engagement with the people of Scotland on how we design tax policy.

Is there a specific aspect of evaluation that you are concerned about, or is it just evaluation overall of how the framework—

With the wellbeing economy, we are committed to the wellbeing economy metrics. The national performance framework is published online and routinely updated to demonstrate performance against the national outcomes. With stable revenues, we have a process of reporting through outturns, consolidated accounts and the budget process.

I appreciate that, ultimately, responsiveness to societal shifts is reflected as and when it happens, and that it depends on what the policy response is. Perhaps it is slightly more challenging to evaluate that, but in the other areas—stable revenues, the national performance framework, and the wellbeing economy, for which we will develop metrics—clear data will be provided to allow any individual, organisation or indeed Parliament to evaluate those independently. That also allows Government to evaluate the performance of tax. Those means of evaluation exist independently of the framework.

I refer members to the decision-making matrix in the document, which lists six aspects of how we go about taking decisions on tax policy. They are not numbered, but the one at the bottom of the column—“Deliverability and Administration”—makes clear the need for detailed and continuous engagement in the process of policy design. For example, with a fully devolved tax such as land and buildings transaction tax or Scottish landfill tax—and indeed for the other taxes that are still to come on line such as the aggregates levy and air departure tax—Revenue Scotland can provide the expertise at the outset to help shape and inform the development of legislation.

Ultimately, our role in that process sits in the legislation that Parliament passes. We want that legislation to reflect best practice and to be informed by the expertise of those who are responsible for operational matters in tax, and who act independently—Revenue Scotland, for example. There will be close engagement and work with the relevant tax authority from the outset of policy design through to implementation. Similarly, should proposals emerge out of the work on local taxation and reforms in that respect, there would be early engagement from the outset with local government, which would act as the tax administration with any local tax, to ensure that we were considering operational matters, which, in turn, would inform how we went about drafting legislation.

The issue is hard baked into the process. We do not design and take decisions on tax policy without giving serious and detailed consideration to issues around avoidance. We achieve that through policy consideration and the work in Parliament to scrutinise legislation. Before we even get to that point, we are in continuous dialogue and engagement with the appropriate tax authority, which can bring to bear technical expertise. That is the approach that we take. In the framework, we convey the point that tax avoidance is a central concern—it is not an afterthought or something that is of secondary importance; it is intrinsic to how we go about tax in Scotland.

That is a fair point. We touched on the limitations of the data that we have available. I take the points that numerous committee members have raised about having data—in the here and now and with regard to forecasts—to more clearly evidence the transition as it takes place. I am happy to take that away, reflect on the issue and come back to the committee with a written response.

The point that Mr Johnson made in recognising our disproportionate reliance on income tax as our primary devolved revenue-raising mechanism is important. There are limits to what we can do with income tax before we start risking the distortionary effects of behaviour change and potentially losing revenue, which the convener mentioned. I know that the predecessor Finance and Constitution Committee explored that in the previous parliamentary session.

Although we will always consider how we can best use our policies on income tax, particularly on the strategic objective to be responsive to societal shifts, the key task is to grow our tax base. Ultimately, the way that we seek to achieve that will be set out in the national strategy for economic transformation and its supporting documents. We will always look for ways that we can show that our tax system is as efficient as possible and that it maximises revenue, but the key challenge is to grow the number of highly paid, highly skilled jobs in Scotland. In turn, that will lead directly to increased tax revenue.

Would Alex Doig like to give some context on how the document was developed in relation to the broader economic sphere? I am conscious that we are focusing on tax, but he could say something about how the document is informed by work that goes on more widely across the Government, particularly with reference to Mr Greer’s question about the interaction between seeking to raise revenue by direct taxation or increasing the tax base.

I will ask Alex Doig to come in on the point around how data informs tax policy.