Chamber and committees

I have a final question before I open discussion up to the rest of the committee. This arrangement is quite new and evolving, and we are to some extent learning as we go along, but does HMRC have any plans to change its approach in future, given the extent to which it relies on estimates for the reports that we at the Scottish Parliament get on income tax take in Scotland?

Good morning and welcome to the fourth meeting in 2022 of the Public Audit Committee.

Agenda item 1 is a decision on taking business in private. Do members agree to take items 4, 5 and 6 in private?

Members indicated agreement.

Thank you. I now turn to Willie Coffey, who is joining us virtually. Willie has a number of questions that he wants to put. Over to you, Willie.

We are going to come on to questions around the cost of administering Scottish income tax shortly, and Willie Coffey will ask about the identification of Scottish S-code taxpayers. Before that, however, Craig Hoy will ask a series of questions.

I thank Mr Davies and the Auditor General very much indeed for their opening statements. As you will expect, we have a significant number of questions.

I want to begin where you left off, Mr Davies. It seems a little bit counterintuitive that at a time of huge collapse in the economy, gross domestic product, gross value added and all the other measures of economic performance, the estimates suggest an increase in the tax take when the pandemic was at its height. We keep coming across references to estimates, samples and assumptions, but can we rely on the accuracy of those estimates?

Can you just confirm that you have no evidence of flight of income tax payers from Scotland to England, Auditor General?

Thank you.

I would like to capture the essence of what we have been saying today. I say to Gareth Davies and Darren Stewart that our approach today has not been pointed at you; we have taken that approach because we are trying to understand where there are gaps and where improvements could be made.

We reflect that this is year 4 or 5 of the distinctive Scottish income tax system, and yet, even at this stage, we do not have Scotland-specific tax gap data—that is, data about the amount that should be paid versus what is actually paid. Further, we do not have Scotland-specific data on compliance and non-compliance or on income tax debt, all of which we have been probing this morning. You are right to say that the reasons relate to the service-level agreement that is in place between the Scottish Government and HMRC, and we need to consider whether it would be useful for us to explore that avenue further.

In previous years—and, to a limited extent, today as well—we have been told that the issue is all about HMRC’s limited resources. If the service-level agreement were adjusted, would it be possible to get that data disaggregated to a Scottish level, so that it could be used to inform the decisions that this Parliament needs to make around income tax rates as well as to give us an understanding of the revenues that would be generated by the rates that are set?

Just to be clear, the report says that the £0.7 million administration fee is

“accurate and fair in the context of the agreement between HMRC and the Scottish Government.”

Could you tell us what you mean by “fair”?

On that note, we will conclude the session. I thank Stephen Boyle, the Auditor General, who joined us in person at our meeting today, and Mark Taylor, who was on hand to answer any questions that we had for him—in the event, I do not think that he was called on, but I thank him anyway.

I give particular thanks to Gareth Davies and Darren Stewart from the NAO. As I said at the beginning, we hope to see them in person at some point in the not-too-distant future, because that would help us in examining the important role that they play in keeping account of how HMRC is functioning in this area, which is of particular concern and importance to us.

As well as any internal reforms, what external changes are needed for the commissioner’s office to address that?