Chamber and committees

About a decade ago, after the financial crash, the FSB said that, without the small business bonus scheme, around one in six small businesses in Scotland would have gone bust, so the question is really about how effective it is relative to other potential measures.

Thank you very much for that very interesting statement. I believe that a lot of questions will emerge from it.

You mentioned two new principles, the first of which was engagement to promote public understanding. In that respect, you talked about the importance of communicating clearly and engaging the public. What form is that engagement and communication taking?

Prior to the devolution of income tax and in the run-up to 2017, there was a lot of discussion about how Scotland would address tax avoidance differently from the United Kingdom Parliament. How has that evolved over the years? I note that one of the new principles is “to minimise tax avoidance”. What has been the Scottish Government’s method—if you want to put it that way—of minimising tax avoidance, and how does it differ from that of the UK?

My understanding was that the Scottish Government was going to take a principled approach to tax avoidance in contrast to the UK’s position, under which, unless something is specifically addressed in legislation, there is an opportunity for avoidance. In Scotland, these things were not to be set in tablets of stone; the idea was that, if the authorities even perceived that the intention was to avoid tax, they would still be able to collect it. I believe that John Mason was on the committee that deliberated on the matter. Are we not moving forward with that? Was minimising tax avoidance not going to be a significant difference between Scotland and the UK?

I have to say that the choice of taxes does not fulfil Adam Smith’s four criteria of certainty, proportionality to taxpayers’ ability to pay, convenience and efficiency. I think that aspects of the chosen taxes—especially VAT—are extremely contentious when it comes to who gets what and whether Scotland benefits disproportionately from an assignment. However, that is undoubtedly a discussion for another day.

I just want to mention a couple of other wee things before I let others in.

First, on the North Sea, there are a lot of highly paid workers there—71,000 at the last count, I think—who earn more than the Scottish average and pay a lot more in tax than the average person. Is the Scottish Government looking at how the switch to green jobs will impact the tax base in that respect?

I do not want to take up too much of your time, minister, but I just want to ask a second question. Has the Scottish Government looked at the issue of behaviour change? Obviously, if we are short of taxes, Governments will be tempted to put them up. However, if you increase taxes in the short term, you might well dissuade people from investing in or living here and therefore paying their taxes either in the rest of the UK or elsewhere, which means that you effectively lose everything. In that respect, is half a loaf is not better than no bread?

I know that today’s announcement on Cambo, which has been made as a result of rocketing fuel prices and the Russia-Ukraine situation, shows that North Sea oil might have a wee bit more life left in it than we thought, but this is a long-term issue. Behaviour change will always be with us in relation to taxation, so what is the Scottish Government doing about it?

We are talking about the Scottish tax framework, so I just want to see what is Scottish about it. How is it different from the UK framework? It was my understanding that this principled approach was a significant difference, but I would have thought that any legislature anywhere would want to try to make sure that avoidance was minimised when it set a tax. Otherwise, what is the point in setting a tax?

Thanks for that response, but what you have outlined is not really public engagement, is it? It involves stakeholders and people like that. How many will there be at the citizens assembly, for example? A hundred folk?

Is that different from what happens in the UK?

My final question is on similar lines. I am curious as to why the focus is on those three taxes: national insurance, VAT and the remaining element of income tax—in other words, tax on savings and dividend income. Those are quite complicated taxes. I will give an example of a business in Glasgow that supplies another business in Manchester, which then sells something to a guy in Aberdeen. That involves a complex chain of VAT. In previous sessions, our predecessor committees have looked at how difficult that is and where the UK Government would suggest that VAT would accrue to Scotland—or not, as the case may be.

Why have you not picked fuel duty, for example? When people buy fuel, that is in Scotland. Because of the geography of the country, you would probably get a disproportionate amount of it. Excise duty is another possible example. I am pretty sure that, when it comes to tobacco and alcohol receipts, we exceed our 8.3 per cent population share. If we had control of excise duty, we would get a higher proportion of it. Those taxes are much easier to collect. That assumes, of course, that the UK Government would be in any way interested in devolving those taxes.

Why have you picked the priorities that you have picked, when there are other taxes that could be devolved that would be a lot less contentious from the point of view of how they are calculated, would be much easier to deliver and would bring in a higher proportion of revenue?