COMPLIANCE
The devolution revolution Justine Riccomini FFTA AIPA Chartered MCIPD ChFCIPP, head of taxation, the Institute of Chartered Accountants of Scotland (ICAS), explains what the key considerations are for taxpayers and businesses when tax devolution occurs
The devolution revolution Since the Scotland Act 1998 was passed, we’ve witnessed a slow but relatively steady devolution of tax powers to Scotland. Wales has followed suit, and now both jurisdictions have a small collection of fully and partially devolved taxes. ICAS has been at the forefront of the devolution process and maintains excellent relationships with the Scottish Government and Welsh Government, who see the Institute as a trusted stakeholder. ICAS has contributed substantially to the formulation of tax policy and legislation as the devolution processes have taken place. In recent months, the Northern Irish Finance Main points ● devolution makes things more complicated, but can taxpayers follow what’s going on? ● Section 35 of the Scotland Act 1998 has recently raised some debate about the true extent of the Scottish Parliament’s powers ● citizens of the devolved jurisdictions need transparency and accountability.
Department issued a consultation entitled, Devolution of More Fiscal Powers, which ICAS responded to, and which demonstrated that Stormont is considering whether a devolved taxes structure is currently the way to go. Just before Christmas, ICAS also submitted a response to the Scottish Government consultation entitled, Breaking New Ground? Developing a Scottish Tax to Replace the UK Aggregates Levy , which represents a further step to fully devolve the tax administration and collection powers to Scotland, as originally planned for in 2015. Lost in the maze For many citizens of these countries, the move to devolve has been simultaneously liberating and complex. Many support the notion of raising taxes in Scotland, Wales and Northern Ireland (NI) for the benefit of those countries and having more powers over how the money is raised and ultimately spent. But there’s no doubt that this right is accompanied by the responsibility to understand how it all works and to be able to hold those they elect accountable for their decision-making. Following the money isn’t as easy as it sounds, however, because the current devolved processes are governed and administered by a mishmash of UK and devolved government departments, including: l HM Treasury l HM Revenue and Customs l The Department for Business, Energy and Industrial Strategy l The Department for Work and Pensions l Welsh, NI and Scottish government departments
l Welsh Revenue Authority l NI Finance Department l Revenue Scotland, and
l a plethora of local authorities who deal with locally raised taxes. On top of that, UK-central government funding is pooled before being divided up between the jurisdictions based on the so-called ‘Block Grant and Barnett Formula’ method (see below), which is a way of dividing up the funding based on the headcount and the relative public funding need of each jurisdiction. This formula and method is also overseen by an overarching set of agreements between the UK and each jurisdiction as to how the money filters through. As such, there’s no doubt that for the ordinary man on the street to find out how it all works is a mammoth task – and without being particularly tax- or economics-savvy, it’s extremely likely that they might get lost in the maze of opacity. Scotland’s journey Taking Scotland as an example, the Scotland Act 2012 simultaneously resulted in handing Scotland more financial powers and increasing its funding volatility. After that, the Scotland Act 2016 introduced powers over rates and bands of a partially
| Professional in Payroll, Pensions and Reward | March 2023 | Issue 88 18
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