Topics recently examined by the Scottish committee include classification of Scottish income taxpayers, an apparent shortfall in LBTT receipts, and progress on VAT assignment and the proposed air departure tax.
The Finance and Constitution Committee (F&CC) is formed by 11 MSPs representing the political makeup of the Scottish Parliament and is convened for the duration of the Parliament; until 29 September 2016 the Committee’s name and remit was Finance only.
The role of the F&CC is to scrutinise:
the Scottish government’s taxation, borrowing and spending plans;
tax revenue forecasts and receipts;
Budget bills;
newly devolved financial powers;
the fiscal framework;
any other matter relating to or affecting the revenue or expenditure of the Scottish Administration or other monies payable into or expenditure payable out of the Scottish consolidated fund;
the estimated costs of proposed legislation; and
constitutional matters falling within the responsibility of the cabinet secretary for finance and constitution.
The F&CC meets regularly, and on 10 May 2017, was examining the implementation reports on Scotland Acts 2012 and 2016.
Section 33 of the Scotland Act 2012, places a requirement on the secretary of state for Scotland and on Scottish ministers to report annually on the implementation of the financial provisions of the Scotland Act 2012 (until 2020 or, if later, until a year after the tax and borrowing powers are fully transferred to the Scottish Parliament). The reports, required from each government, need to be laid before both Parliaments. The fifth of such reports, and the first following the devolution of further financial powers in the Scotland Act 2016, were being considered by the F&CC.
Recent discussions at the F&CC session concern the Scottish government’s implementation report. In the evidence session, the F&CC focused on the biggest challenges around the fiscal framework, including partial devolution of social security, Scottish income taxpayer classification and VAT measurement. Mr Mackay, cabinet secretary for F&CC, acknowledged that it is possible that the cost of delivery of devolved social security powers, which represent 15% of the total social security measures (the remaining 85% remains at Westminster for now), will be greater when they are devolved, and any balancing charge will need to be made up by the Scottish government.
The F&CC continues to question why land and buildings transaction tax receipts are below forecast income. Mr Mackay stated that there was no evidence that the new devolved tax was having a negative effect on the property market in Scotland; results had been disproportionately affected by the downturn in Aberdeen. The implementation report stated that forecasts and forecast methodologies were scrutinised and challenged over the course of 2016 and endorsed as reasonable by the Scottish Fiscal Commission in its Report on the draft Budget 2017/18.
The F&CC had questions about the identification of ‘S’ taxpayers, given that 420,000 had been missed at an earlier stage. Mr Mackay said, ‘We do not believe that there is a large-scale issue with the outstanding identification of any Scottish rate taxpayers.’ However, concerns remained because the committee noted that there appeared to be differences on the figures reported in the secretary of state for Scotland’s implementation report and the Scottish government implementation report which showed a variance of 270,000 taxpayers. (This is despite HMRC apparently being the source for each report.) There were also discussions about the running costs of HMRC’s administrative function, which could rise from its current £1.5m per annum to a maximum of £5m per annum depending on the divergence of rates/bands from ‘rest of the UK’ rates.
VAT assignment will apply from 2019/20 and the methodology to do so was discussed: it is still being worked upon, and draws on existing regional modelling of VAT and expenditure surveys, driving an educated estimate whilst also taking into account complex VAT arrangements in different sectors such as financial services. There is also a specific, bespoke piece of work being undertaken in relation to VAT and tourism, perhaps reflecting similar interest in VAT and the tourism sector in Northern Ireland.
The Air Departure Tax (Scotland) Bill and the Scottish Landfill Tax (Administration) Amendments Regulations, SSI 2017/139, were also discussed. This follows the introduction of the Air Departure Tax (Scotland) Bill to the Scottish Parliament on 19 December 2016. Assuming the Bill successfully completes its Parliamentary passage, and under terms agreed between the Scottish and UK governments in the fiscal framework, air departure tax will replace APD in Scotland from 1 April 2018.
Finally, the Budget Process Review Group (BPRG) issued an interim report on 10 March 2017 with a series of questions and to which it has now received 26 submissions. Clearly, there is significant interest in reshaping the Scottish Budget process and its related scrutiny.
Home >Articles > The role and remit of Scotland’s Finance and Constitution Committee
The role and remit of Scotland’s Finance and Constitution Committee
Topics recently examined by the Scottish committee include classification of Scottish income taxpayers, an apparent shortfall in LBTT receipts, and progress on VAT assignment and the proposed air departure tax.
The Finance and Constitution Committee (F&CC) is formed by 11 MSPs representing the political makeup of the Scottish Parliament and is convened for the duration of the Parliament; until 29 September 2016 the Committee’s name and remit was Finance only.
The role of the F&CC is to scrutinise:
the Scottish government’s taxation, borrowing and spending plans;
tax revenue forecasts and receipts;
Budget bills;
newly devolved financial powers;
the fiscal framework;
any other matter relating to or affecting the revenue or expenditure of the Scottish Administration or other monies payable into or expenditure payable out of the Scottish consolidated fund;
the estimated costs of proposed legislation; and
constitutional matters falling within the responsibility of the cabinet secretary for finance and constitution.
The F&CC meets regularly, and on 10 May 2017, was examining the implementation reports on Scotland Acts 2012 and 2016.
Section 33 of the Scotland Act 2012, places a requirement on the secretary of state for Scotland and on Scottish ministers to report annually on the implementation of the financial provisions of the Scotland Act 2012 (until 2020 or, if later, until a year after the tax and borrowing powers are fully transferred to the Scottish Parliament). The reports, required from each government, need to be laid before both Parliaments. The fifth of such reports, and the first following the devolution of further financial powers in the Scotland Act 2016, were being considered by the F&CC.
Recent discussions at the F&CC session concern the Scottish government’s implementation report. In the evidence session, the F&CC focused on the biggest challenges around the fiscal framework, including partial devolution of social security, Scottish income taxpayer classification and VAT measurement. Mr Mackay, cabinet secretary for F&CC, acknowledged that it is possible that the cost of delivery of devolved social security powers, which represent 15% of the total social security measures (the remaining 85% remains at Westminster for now), will be greater when they are devolved, and any balancing charge will need to be made up by the Scottish government.
The F&CC continues to question why land and buildings transaction tax receipts are below forecast income. Mr Mackay stated that there was no evidence that the new devolved tax was having a negative effect on the property market in Scotland; results had been disproportionately affected by the downturn in Aberdeen. The implementation report stated that forecasts and forecast methodologies were scrutinised and challenged over the course of 2016 and endorsed as reasonable by the Scottish Fiscal Commission in its Report on the draft Budget 2017/18.
The F&CC had questions about the identification of ‘S’ taxpayers, given that 420,000 had been missed at an earlier stage. Mr Mackay said, ‘We do not believe that there is a large-scale issue with the outstanding identification of any Scottish rate taxpayers.’ However, concerns remained because the committee noted that there appeared to be differences on the figures reported in the secretary of state for Scotland’s implementation report and the Scottish government implementation report which showed a variance of 270,000 taxpayers. (This is despite HMRC apparently being the source for each report.) There were also discussions about the running costs of HMRC’s administrative function, which could rise from its current £1.5m per annum to a maximum of £5m per annum depending on the divergence of rates/bands from ‘rest of the UK’ rates.
VAT assignment will apply from 2019/20 and the methodology to do so was discussed: it is still being worked upon, and draws on existing regional modelling of VAT and expenditure surveys, driving an educated estimate whilst also taking into account complex VAT arrangements in different sectors such as financial services. There is also a specific, bespoke piece of work being undertaken in relation to VAT and tourism, perhaps reflecting similar interest in VAT and the tourism sector in Northern Ireland.
The Air Departure Tax (Scotland) Bill and the Scottish Landfill Tax (Administration) Amendments Regulations, SSI 2017/139, were also discussed. This follows the introduction of the Air Departure Tax (Scotland) Bill to the Scottish Parliament on 19 December 2016. Assuming the Bill successfully completes its Parliamentary passage, and under terms agreed between the Scottish and UK governments in the fiscal framework, air departure tax will replace APD in Scotland from 1 April 2018.
Finally, the Budget Process Review Group (BPRG) issued an interim report on 10 March 2017 with a series of questions and to which it has now received 26 submissions. Clearly, there is significant interest in reshaping the Scottish Budget process and its related scrutiny.
