Call for better public understanding of devolved taxes
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
29 April 2021
Justine Riccomini explains why it important for the business community and general public to understand more about taxation in Scotland.
Why is this important?
Improving public understanding and awareness of the devolved tax regime is important because, like it or not, all members of the Scottish public are stakeholders in their country’s tax regime and therefore have the right to understand what is being raised, where from, and on what the revenues are being spent. This is why ICAS has called upon the Scottish Parliament to consider how it can improve public awareness and understanding of the devolved tax regime.
Accountability
Holding the Government accountable for its tax and spending decisions is something which is within the gift of the Scottish public – provided it has a grasp of what powers are available at any point in time (as they change).
The challenge is not unique, but in the early days of establishing a distinct regime, there is an opportunity for politicians to better involve the public in that journey. Scotland could take a lead on this important civic duty.
What are the opportunities for increasing understanding?
This could be helped by:
- Reinstating the Scottish Government’s pre-pandemic work on a tax communications strategy to show taxpayers how the tax system works, the responsibilities that the UK and Scottish Governments have over the tax system respectively, and what contribution the devolved taxes make to public services;
- Promoting a better understanding of the tax system by considering the role that Scotland’s education system can play in boosting public awareness and understanding of how the tax system works and why it is important to contribute to public services funding; and
- Allowing for greater visibility for the devolved taxes in the Scottish political calendar.
Eight out of ten Scots
In the most recent CIOT poll conducted by the Diffley partnership in March 2021, over eight in ten Scots said they wanted to see clearer and more structured information about how taxes are decided in Scotland. This statistic is a clear indicator that things have not really improved since the devolved taxes were brought in, 6 years ago.
Fail to engage = failure to comply
In a similar vein, the poll revealed that there has been broadly no improvement in the public’s awareness of the role of Scottish Parliament in terms of taxation, this being less than half at 43%, and since 2018, only four out of every ten Scots have any awareness of what the term “Scottish Taxpayer” actually means.
Whilst we know that the general public across the UK grapples with the complexity of taxation and work is ongoing on a number of fronts to attempt to lessen the volume of legislation and reduce complexity, in Scotland, if the right approach is taken, the opportunity for articulating the respective responsibilities of the Scottish Parliament and Scottish Government is there for the taking.
Put simply: If people fail to understand how the tax system works, they are more likely to fail to comply with the rules and regulations. In the case of the devolved taxes, it also means that taxpayers may not know that the Scottish Parliament is now responsible for raising some of the taxes they pay.
New and existing Scottish Taxpayers, investors and other stakeholders
Scottish taxpayers have a right to understand the rationale for why Scottish taxes are different, how these taxes work and their relationship with the wider UK tax system. As taxation is generally governed by political will, it is also important to have a basic grasp over what any divergence delivers in terms of public spending and be able to judge for themselves whether this has been a success or not. This principle applies whether taxes are devolved to a national jurisdiction or from central to local government.
For those thinking of moving to Scotland, and in particular for higher earners, differences between the UK and Scottish tax regimes may influence their decision – especially as currently the two main taxes affecting individuals in terms of their personal taxation – income and property – are partially and fully devolved respectively.
The tax base… a moveable feast?
Scottish income tax receipts may be more volatile when the number of Scottish Taxpayers and the amount of taxes they each pay is challenged when ‘work from home’ could be anywhere across the globe.
The exponential use of technology, especially for meetings, means that people do not necessarily need to live and work in the same place if they are not required to be physically present in an office all the time. Tax bases will undoubtedly change if greater numbers of middle to high earners decide to move to a different tax jurisdiction – whether that is within the UK or to another country altogether, whilst they are still able to carry out the same roles.
Now’s the day, and now’s the hour
The tax system, and the public perception of whether it is fair and delivers on public services funding requirements will never be clear to people if they lack even the most basic knowledge.
The correlation between these factors links directly to compliance and societal acceptance of collective responsibility. There presently exists an excellent and, dare I say it, unique opportunity for the Scottish government to take the bull by the horns, promote this regime and engage with its main stakeholders – the public.
ICAS therefore calls for the next Scottish Parliament to prioritise a tax communications strategy which reinforces to its public the rights and responsibilities conferred to them. We recommend that taxation and financial education should be supported though the educational curriculum to give citizens a sense of what part they each play in making their country a success.
