Chamber and committees

I think that the issues around estimates are reflective of the broader challenge that we have with data. The issue around compliance has been highlighted to the committee directly by stakeholders. I simply highlight it as an example of where this power and the devolution of the tax can confer a benefit, which is identified by those who operate in the sector.

I think that there will be substantive value through the devolution of the aggregates levy and the creation of a Scottish aggregates tax. Having Revenue Scotland as a tax authority, with the rigour and skill that it can bring to the administration of tax—also touching on the compliance issues that we have explored—will be of benefit and value.

I am conscious of how your question was framed. The convener’s earlier remarks about ambition perhaps relate to the longer-term trajectory of the tax. How will the rate be used as a policy tool? I have sought to set out the reasons and the rationale, and I will not repeat that, but the points that you touched on in your previous question, Ms Thomson, on some of the known unknowns regarding the aggregates tax, are not insurmountable problems. They will be remedied through the experience of the tax coming online and the data that is collected through Revenue Scotland.

When it comes to the benefit and gain from the devolution of the tax, we can be clear about its administration, while addressing some of the concerns that have been raised by stakeholders and committee members around compliance. With more data and greater understanding of how the tax operates, and given the make-up of the sector in Scotland, there will be an opportunity for future Governments to take a view as to how the tax can be more effectively used, both in and of itself and in conjunction with the other fiscal and regulatory levers that are at the disposal of the Scottish Government.

I recognise that, in the cash revenue that it would represent, the tax would amount to a very small part of the Scottish budget but, for the reasons that I have set out, I think that there is value in the tax being devolved. I recognise that, if one compares it with the quantums of revenue that are generated through the partial devolution of income tax or the full devolution of LBTT, they are of different orders of magnitude. Nonetheless, for the reasons that I have set out, I think that there is value in the tax being devolved and in the approach that we have taken through partnership, engagement and collaboration with stakeholders. The design of the proposed legislation is consistent with our framework for tax principles and with the new deal for business approach.

There is not a statutory requirement, as I would define it. The switching off of the UK aggregates levy requires an order to be made by the UK Government—I will be corrected if I am wrong about that. However, a set of commitments was made as part of the Smith commission and the 2016 act, and as part of the fiscal framework, and I recognise that there is interest in a range of areas across those commitments. There is not, as we understand it, a set date, if I can put it that way, when the UK aggregates levy would be switched off irrespective of whether we had passed legislation to introduce a Scottish aggregates tax.

I would be happy to consider any specific views that the committee has. The operation of Revenue Scotland is governed by existing legislation that is quite detailed and complex, with the guidance and approach that Revenue Scotland sets out. I am more than happy to consider the committee’s specific concerns, if it has any, about the way in which any of the sections are drafted in part 2 of the bill, if it is a matter that the committee will raise in its stage 1 report. I know that that point was touched on earlier. I will then discuss those concerns with Revenue Scotland.

We want to ensure that we have legislation that allows Revenue Scotland to continue to operate to the effective and high standards at which it does operate. However, I appreciate that stakeholders and the committee might raise concerns and want statutory provisions, backstops, rights and so on to be set out clearly in legislation. As I said, for specific concerns on that point, I would be more than happy to engage with Revenue Scotland and report back to the committee.

I will not rehearse the points that I made earlier about the structure that was set out for the aggregates tax at its inception. There is certainly scope for introducing additional rates under the legislation, but we must operate within the parameters set out in the Scotland Act 2016. Any further changes to the aggregates tax or any wider considerations around localising taxes—if that is the member’s suggestion—would require detailed consideration, taking into account the considerable risks around the added complexity that could arise.

Jointly with the UK and Welsh Governments, we have commissioned a survey of production and movements of aggregate for 2023, which should be available in 2025. However, the specific tax data that will come from the tax going live and being administered by Revenue Scotland will give us and Parliament the opportunity to consider and interrogate any propositions around what the rate should be.

I cannot pre-empt what decisions the Government will take in relation to the budget for the year when, subject to Parliament’s agreement to the legislation, the tax will go live. However, I assure you that we are conscious that one of the challenges that we will have to address is the building up of the evidence base and the data, which is just a case of time.

We decided on the approach that we have taken to introducing the legislation and the time that we are allowing before we expect the tax to go live in order to provide as much reassurance as possible and, crucially, as much opportunity as possible for engagement with industry. We want to be absolutely consistent with the approach that is set out in our framework for tax and, importantly, in the new deal for business. We want to have that level of engagement with those who operate in the sector and to give them the opportunity to bring their expertise to bear, so that we can minimise any risk and allow for the smooth and stable transition of the power to the Scottish Parliament. Future Governments will have the opportunity to make different decisions, particularly as more data becomes available—more data will be available the longer the tax is online.

As I said, at this stage, with regard to the bill, the crucial thing is to ensure that we have the appropriate legislative framework for the operation of the tax in order to provide the necessary stability and continuity and a proportionate and safe transfer of powers.

I am conscious of the committee’s broader interest in public service reform. Clearly, automation will be central to that. We all appreciate that automation provides tremendous opportunities but also significant risk. I imagine that we all agree that we want to seize those opportunities in a way that does not expose us to, or which minimises, the risk that comes with those. Therefore, with regard to this instance, we recognise that, if there is an opportunity for processes to be automated that will improve the efficiency of Revenue Scotland and enable it to free up staff capacity to take on more complex judgment-based activities, that would be a good thing.

Therefore, the questions are how we can achieve that and how we can be assured that proper consideration has been given to achieving that while avoiding the risks. That is why we have set out that this would be a regulation-making power. There would be consultation and stakeholder engagement as part of that and, of course, parliamentary scrutiny. However, I want to reassure the committee that, although the Government recognises the huge opportunities that artificial intelligence provides for more efficient and effective delivery of public services, we also recognise that there are concerns about some of the risks that can attend the adoption of AI. It is important that we fully interrogate those risks in a transparent way and that Parliament is fully involved.

With regard to the regulations that would be brought forward under the provisions in the bill for automation in Revenue Scotland, I can commit to providing a full opportunity for parliamentary scrutiny on top of the public and stakeholder consultation and engagement.

You will appreciate that I would not want to speak on behalf of the whole Government on broader issues of parliamentary reform, not least because I recognise the independence of Parliament in those matters. However, with regard to my portfolio responsibilities around devolved taxation and the work that I do in supporting the Deputy First Minister on the budget process, I am happy to explore where there could be consensus. I appreciate that the Parliament might wish to provide a broader context for the consideration of issues of parliamentary reform, and I recognise the work that your predecessor committee in the previous session of Parliament undertook and led on in that area.

As I have said, there are clear arguments for such an approach, but people might want to use other arguments against it. There will be an opportunity to have that discussion. Given the interest that members of the committee and stakeholders have expressed, I would be keen to engage, but I stress and reiterate the point that the approach that we have around the budget process has been arrived at jointly with Parliament. I do not want to risk saying anything that would be contrary to the spirit of that.

I have no further comments, convener.

Amendment 17 agreed to.

Section 36, as amended, agreed to.

Sections 37 to 75 agreed to.

Long title agreed to.

The amendments form an important group, as they relate to how businesses will be affected by any visitor levy that a local authority seeks to introduce.

Amendments 3 and 5, which were lodged by Pam Gosal, seek to exclude from having to collect and remit a visitor levy any visitor accommodation that is operated by a body with an annual turnover that is below the VAT threshold. I know from my discussions with business organisations that there is a concern about the VAT treatment of a visitor levy, which would be decided by the United Kingdom Government. The Scottish Government cannot decide the position on VAT. The Scottish Government’s position is that any local authority that is thinking of introducing a visitor levy will need to consider the potential VAT implications for relevant businesses in its area.

Under the bill as introduced, a local authority, when creating a visitor levy scheme, could choose to create an exemption from the scheme for businesses that are near the VAT threshold. However, I am not persuaded that that should be imposed at the national level. Local authorities are best placed to know their local circumstances and the businesses in their area. I do not want to remove the discretion for local authorities to decide what exemptions work in their area, including in relation to VAT.

For those reasons, the Government does not support amendments 3 and 5, and I ask the committee not to support them.

I understand the motivation behind Daniel Johnson’s amendments 38 and 39. The Government continues to listen to businesses, and we will seek to minimise the administrative burden as much as possible for businesses that are implementing a visitor levy. However, I am not persuaded that we should remove from local authorities the flexibility to decide what is right for their local circumstances, or that a national definition of a small business, imposed by ministers in regulations, is the correct approach. A local authority could choose to create an exemption for small businesses in its area if, after consultation, it was decided that it was right to do so. Given that flexibility in the bill, the Government does not support amendments 38 and 39, and I ask Daniel Johnson not to move them. However, I am happy to continue to have discussions. I think that aspects of the administration and Mr Johnson’s well-made points can be captured through the guidance process.

I appreciate the intention behind Miles Briggs’s amendment 42. I agree that it is essential that businesses are fully engaged in any decision to introduce or modify a visitor levy scheme. I also agree that any impacts of a visitor levy scheme on a local authority’s area should be fully assessed. Section 12 of the bill already requires a local authority to carry out such an assessment, so I do not think that amendment 42 is necessary. The expert group on bringing together business organisations and local government is currently developing national guidance for local authorities on the use of any visitor levy power. I expect the guidance that it produces to cover the impact assessments that it would be good practice for local authorities to produce. I have also lodged amendment 15, which is in a later group, to put the guidance on a statutory footing. If Mr Briggs still feels that further details are needed on the impact assessments to be completed by local authorities, I would be more than happy to meet him and potentially to write to the expert group to ensure that it is taking that important aspect on board.