Rise to the best! welcome to the 10th meeting in 2024 of the finance and public administration committee they'll need to manage another agenda today the evidence for two panels of witnesses on the aggregates tax and devolved taxes of Scotland and Isabel Unverno tax laws subcommittee nor society of Scotland welcome to be all to the meeting Felly, ddim iawn i'w eich gymhreistwysio'n eu bod lleidion. A fyddwn i'n ddifft o'i perthynacedd yn oed yn ei ddoddiadu cyfnodod agri ac yn digwydd yn ei ddoddiad ydw i'ch ddoddiad ydw i'ch ddoddiad a'i ddoddiad. Mae'n mynd i'n digwydd i'ch chi'n ysgolch cyffordd yn dechrau sgoldeichydd a hwnnw o'r dioddiadau mynd yma, oedd ddoddiadau ei ddoddiad, i ddoddiad agri a'ch ddoddiad ei fath. Mae'n blwyr, rydyn ni ddim yn gweld gan gwybod. Felly, ar y cyfriffeil cyfrif glyfwyr o'r ddim yn gwneud y cyfrif erbyn yw lefi yw'r efallai ar y gweithio. Felly mae eich cwmhysgol yn ymwneud yn edrych i'r Prifysgol Gwmwylliant. Rwy'n ei wneud am y cyfnodd hon i'r Ffresgol Llywodraeth. Rwy'n ei wneud yn rwyf yn gyfliwyr y cwmwysgol. I should also let you know that I'm a part-time consultant to Revenue Scotland. Before that, I was a lawyer for revenue and customs with quite a lot of experience of the litigation with the British Agreements Association. In the course of the expert panel's meetings, I think that there was some concern expressed by the British Agreements Association representative in particular that there were unregistered sites from which aggregates were being taken, which were competing with their members locally. How much is being taken, how much of it was simply anecdotal and not very much? I'm afraid of having that. I can't help you. To be fair, when I was asking the question, I should have said that I should really ask Isabelle to answer it because it was really her paper that mentioned that figure. Unfortunately, I don't think that I have any more information than was included in our paper. I'll move on a wee bit to also on your paper in section 4.10. One of the issues that has obviously been raised is the issue of potential cross-border issues relating to differential taxation. We went on a visit a couple of weeks ago and we were told that there is not really much cross-border because the taxes are like £2 a tonne and it costs a lot more to pay the wages of a driver and have a truck and put petrol in it and all that and ship it hundreds of miles than the £2 would impact. You have pointed out in your submission that Scottish exports far more aggregate to the rest of the UK and it imports over 5.5 million tonnes compared to 16,000 new import, which is obviously a colossal differential. I take it that these are aggregates that can't be sourced elsewhere in the UK. You also go on to talk about the because of the way the bill is structured and relations between the UK and the Scottish Government operate. Scotland could lose up £8 to £10 million a year in revenue. I just wonder if you can expand on that a wee bit. I guess it's really difficult to predict how things would work if aggregates or when aggregates taxes are introduced here and if there are different rates and so on. Companies may organise their affairs differently, but those were just estimates of how much it could be effective if aggregate from here was actually taxed not in Scotland but in the rest of the UK. One of the issues that you are concerned about is impact potentially on other taxes, is that right? LBTT, for example. Are we talking about the off-sitting mechanism now? Yes, indeed. That's not something that we've taken any evidence on so far, so I'm quite interested in hearing your view on the public record. I think the concerns that we have at ICAS are around, as you know, the second part of the bill wasn't consulted on. Had it been, we'd probably have made the case at that time that the off-setting proposals, which I think that what Revenue Scotland is trying to do, which this comes from our conversations with Mike Paterson at various meetings that we've had, is to sort of emulate the provisions within section 130 of the Finance Act of 2008, which allows for offsetting of debts against credits across taxes. The explanation that we had when we were having meetings with Revenue Scotland and Scottish Government about this was that the proposal was to offset any tax against any other tax. I guess the question that I had at that time, which I still have, is that there are two, currently there's two fully devolved taxes and there's potentially another two in the pipeline in terms of building safety levy and Scottish aggregates tax. Given that they're all fairly low-level taxes in the first place, they're not huge mainstream big hitters like income tax and VAT. What are the likely incidences of even needing to use a piece of legislation like that to offset debts against credits? I think Revenue Scotland's statistics overall show that, generally speaking, they seem to be relatively successful at collecting the two devolved taxes that they currently administer and collect, so I'm not really sure why they need that piece of legislation right now at this stage. I just felt that it was probably maybe a little bit premature at that stage. You've actually said in your paper that it appears somewhat heavy-handed, and I have to say I think that Mr Brown and Eric Gillespie are much the same in their submissions in that regard as well. I think that my understanding is, and we'll obviously take evidence from Revenue Scotland subsequently about collection rates for about 98, 99 per cent for the other taxes, so I can understand it. I mean, I'm just wondering if Ferry Can Isabel can comment on that particular part of the bill as well. I think that I have a slight issue with the provision on offset for this reason. When the section 130 of the Finance Act 2008 was originally introduced in Parliament in Westminster, it was territorially limited to England, Wales and Northern Ireland. The territorial limitation was deleted or abolished in the Finance Act 2016 so that it was only since then that the provisions in section 130 regarding offset applied to Scotland. You would see from the explanatory notes to the France Bill 2016 that the reason why the territorial limitation was abolished was to provide consistency across the UK, although it had been felt prior to then that the Scottish common law of set-off had been perfectly adequate. In other words, England Revenue before 2005 and Revenue and Customs after that had considered that the Scottish common law of set-off was perfectly adequate for the need of a taxpayer, for example an amount of VAT, but the revenue was due to a repayment of corporation tax, then you could set off the one amount against the other simply under common law. There was no need in Scotland for the section 130 provisions, which are essentially being replicated in this bill. I just wonder why it is that Revenue Scotland considered the need to power the common law had been thought perfectly adequate. I would echo what Justine said about the lack of consultation on part 2 of the bill. In relation to set-off, we note that there do not seem to be many protections for taxpayers in the legislation that is proposed here. It seems to allow Revenue Scotland to offset both amounts of LBTT against other amounts of LBTT, but also across the taxes. It does not really make it clear in the legislation that that would only be the case if everybody had agreed that the amounts were actually payable and there was no dispute about them. The section 130 provisions in the UK legislation is not something that we are terribly familiar with because we I think are conscious that they are not really used all that often. It is a sort of extreme measure type of provision. We just question whether that is appropriate. It is probably important that, if it is introduced, there is a lot more protection for taxpayers. I think that we would say the same about clause 52, which is the overpayment relief claims. For LBTT, which is the tax I know most about, you can amend a return within 12 months if you have overpaid tax, but if 12 months has passed, then the only remedy you have is an overpayment relief claim. This section in the bill is saying that you are not allowed to make an overpayment relief claim if you owe some other tax. You have said in your submission that it is disproportionate. The safeguards which you touched on further on saying that there do not appear any safeguards for tax with the deal with situations where the tax payer may not agree that they fail to pay an amount of tax because they do not believe that the tax is payable. What safeguards should there be introduced into the bill? In relation to both sections, there need to be provisions sort of setting out when it was the case that a liability had been determined, you know, whether it was that all appeals had been worked through and so on and so forth, which does not appear to be in the bill. So there would need to be that kind of protection. I think in the HMRC guidance that relates to section 130 it does talk about that in some detail. Those just seem very powerful provisions in the hands of revenue Scotland with no protections for the tax payer. Eric, you have said that we would suggest that further controls are placed upon the system of credits with interactions between Scottish aggregate tax and UK aggregate levy to introduce a likelihood of potential abuses taking place. I am just wondering if you can tell us a bit more about that. The main difficulty which there are with the current provisions are regards to the export of aggregates from Scotland. You touched on that already, but you mentioned a figure of about five and a half million. In the Scottish Government information paper, the figures were something like two and a half million tonnes were exported to England and just over 3.7 million were exported to Europe. Most of that, and just to touch on your question about the costs and so on, most of those, as I understand it, are exported by ship. They go from the Glen Sander quarry in Morvern or they go out of Murray, possibly from Invergordon or somewhere like that. There are some exported by ship from Leith. The difficulty is what is proposed is that if you have a Scottish quarry exporting to England, they will put in a return saying that they are exporting to England. They claim a credit because the quarry is not going to be commercially exploited until it arrives at a site somewhere in England and then it is going to be sold on after that. That is where the commercial exploitation takes place, so the tax takes place in England and not in Scotland. Revenue Scotland will need power to be able to investigate the supplier in Scotland, just as, for example, there are powers to revenue in Scotland to check that matters that are claimed to be exported from the UK can be checked that they have actually been exported. Of course, that is a real issue about the fact that, if the tax is levied after it has been sent down to England, the UK Government effectively gets the tax rather than the Scottish Government gets the tax. That is why we are talking about possibly an £8 million to £10 million lost to the Scottish taxpayer. That is right because if the figure was just over £2.5 million exported to England, you would multiply that by £2 million and you would get a £6 million figure. Yes, £5 million, and a million tonnes was obviously the figure that we got on the submission. That will be a year, I would imagine, in Israel, so it would be a bold part of the figure. You said in your response that it is vital that Revenue Scotland policies complies with the tax effectively, hopefully by lasing extensively with CEPA and ensuring that CEPA has the powers and resources that it needs to regulate the aggregate sector and ensuring that appropriate sanctions are in place for non-compliant behaviours that affect fair competition. You have obviously got some concerns about the way that the system is operating at the moment. I am just wondering if you could give us any specifics about how that can be improved through this bill. To your original point about the number of registered operators, I have a member on my devolved taxis committee at ICAS, who is an expert on aggregates. She has brought a lot of concerns to that committee about unfair operations because of people being unregistered. The point that she is trying to make is that CEPA, Revenue Scotland and the Scottish Government need to be perhaps a bit more cohesive in their overall policing of operators so that they can do more enforcement and more day-to-day policing, which obviously requires significant resource, because it would probably be most likely to be rather than a sort of paper chase or a paper trail. You have probably been requiring people to actually physically visit premises to see what is going on and how the operations are taking place and whether those operations are registered or unregistered. Only then, because at the moment it is a bit finger in the wind, we know who is registered. We do not know who is unregistered and we never will unless we actually physically go out and check. The concern that we have is that there is not necessarily a level playing field and that the resources that might be required to check on that are significant, especially seeing as, as we have said, Scotland is exporting more than it is importing, so there is an awful lot of aggregate potentially leaving Scotland that could be from an unregistered source, but we cannot know that. Can I just quickly touch on the section 130? Of course, of course, you can, yeah. There was something on the AlfaGott dimension, which was that I have been seeking a meeting with HMRC's debt management and banking team, the policy side of things, for quite a while now, just so that we and our collective counterparts can actually try and speak to them and work out how often section 130 is actually used, because I know that it is used, for example, in the pay-as-you-earn and in-eye offsetting mechanism, with employers paying, overpaying, underpaying, it is possible to offset that. It is possible to offset some tweak a few bits of VAT, but, generally speaking, as a collective of tax experts, we are not really aware of a massive amount of use of section 130. We could stand corrected, but we are not really aware of it particularly. So it looks as if we may have a meeting coming up over the next week or so with HMRC to actually discuss that point and look at statistics and things like that. So I am sorry that it has come a little bit late for this particular meeting, because I have been trying to arrange it, but I think that if I get more information, then I will be able to comment on that later. We will certainly be happy to receive that. We are expecting the minister next week, so if we receive it before then, we can sit and look at questions to the minister. We have been told anecdotally about those unregistered quarries and stuff like that. Scotland is not Russia, and it is not a vast expanse of a country. It should be easily enough, if one would have thought to find a few unregistered quarries and tax them. It seems bizarre. If one would have thought that it is legitimate, I would get selling quarries and say that the guy down the road is paying his taxes and what are you going to do about it. I do not know what kind of scale we are talking about, because we have been told that SEPA can be very finicky about the licences that registered aggregate producers have, and yet there seems to be almost a complete ignoring of those who are allegedly not registered and not paying any taxes. It seems bizarre to me. I do tax, but I am not an aggregates, but I think that based on, as you say, anecdotal evidence, there seems to be something going on, and it seems to be the case that perhaps some further investigation might be needed into that. I am not particularly sure of how far-reaching SEPA's powers are and how they can work more effectively or more collaboratively with Revenue Scotland to make sure that what is supposed to be coming into the Scottish purse actually reaches the Scottish purse. It might be worth having a little look at the overall basket of powers that are currently available and seeing whether they need to be tweaked or something. Just to say that the introduction of a new tax is a great opportunity to look again at how those things are done, so it may be that there is a chance to reel in some of the miscreants and get them registered and so on, because there is a starting again with the aggregates tax in Scotland. Yes, that is indeed, Eric. It is also worth bearing in mind that SEPA has a big role in the Scottish landfill tax. They do not have a similar role, as far as I am aware, as regards quarries. For example, there is not a Scottish register of quarries that SEPA holds. They would know who landfill tax operators are, but SEPA is not tasked with quarries to anything like the same extent. They might know where the quarries are, but they do not have the same regulatory duties, I do not think, as regards quarries, as they do landfill sites. There may be some quarry operators who operate landfill sites, but there is not a great commonality between landfill site operators and quarries operators. I am going to open out the session to colleagues on the table now. First, we will be joined by Michelle. Thank you very much, convener. As a general question, first of all, do you think that the split between primary legislation and subordinate legislation is correct, or should there be more in the primary or more in the subordinate? My background is tax. Most of its old Westminster tax, where they set out the rates in the legislation, is not the policy of the Scottish Parliament. As I understand it, the rate tends to be set out in the way of statutory instrument. Personally, I would have thought from the point of view of transparency that setting of the rates in the face of the bill would be a preferable approach. Then you would need primary legislation every year to change it? Exactly. One of the things that I think comes through from all of our submissions is the need for the Scottish Parliament to consider having its annual finance bill. I am sympathetic to that, but I shall leave my colleague Liz Smith to ask you about that, because that is her baby when it comes to the committee. On the actual rate that you have mentioned, do any of you have views—I accept that you are not experts in aggregates—but one of the aims is to encourage recycling, so that we take less out of quarries and we take more and reuse it? Do you think that matching the UK rate is a good idea, or would it be a problem if we did not? I would venture to say that it was probably a good idea, because what you really do not want is some sort of competition or tourism or people avoiding taxes or doing behaving in a different way because there is a different rate. When we are talking about the movement of goods aggregate cross-border, I think that it is probably a good idea if the rates are on a par. Yet the downside to that is that the recycling industry is disadvantaged in many ways, and there is very little incentive to recycle, but it is cheaper just for people to get stuff out of the quarry. There are real consequences, but we have always got to take them into account. Mr Vanders, do you want to comment on that? I think it is a bit of a balancing act, really, as to avoiding the aggregates tax tourism, whilst also incentivising recycling. The law side does not normally comment on rates, so that is not really a bad thing. Mr Brown, you were already talking about some of the difficulties to the convener about pinning down when the aggregate is actually used, because that could be somewhere else in the UK or even beyond. Would it have been better to make the tax at the source, so when the tax would be payable when it is taken out of the ground? I think that there is a legal difficulty with that at the moment, because I think that the way the Scotland Act provisions are for the defoliation of the tax, you are not able to tax Scotland something that might be somewhere else before it has been commercially exploited, not so much down to England, but to Europe, which I understand is where most of the aggregate that is exported goes when it goes out of Glensander. Glensander is a bad example in that respect. The other thing is that just because it has been taken out of the ground does not mean that you have got any money for it. You do not get any money for it until you have agreed a sale. What some of the leaving aside stuff that comes out of Glensander, what you have in the UK is that you have four very large producers who operate sites right across the UK, and what they will do, we are told or understand from the expert group, is that they will dig something out of a quarry in place A and then transport it to a site for storage, which may be the first of Scotland in site B, where it is stored until such time, as a customer comes along and says, I want 10 tonnes of whatever aggregate you have in that pile over there. It is at the point of sale that the money is available to pay the tax rather than the point at which the quarry stone comes out of the ground. That makes sense. If I and the fellow two want to come in by all means, but I have another couple of questions, Mr Brown, you mentioned your submission and you think that there might be scope for confusion when the new tax is introduced in 4.4 in your submission until site operators and businesses are used to the new set and interaction with UKAL. Is that a serious concern? Do you think that we need to do something around that? I am not sure now. I think that for Scottish operators who only sell aggregate within Scotland, all they are doing is paying the person to whom they write the checks or send the money. It is no longer going from the UK. They are going to fill in essentially a similar return and they are going to send an amount of money to Revenue Scotland rather than the HMRC. I think that there may be a difficulty for importers from the rest of the UK and to Scotland, the amounts of product that are imported are very low. There is an issue, perhaps, in the bill. You have section 26, which provides for the appointment of representatives by importers who are outside of the UK but not representatives who are within the UK but north of Scotland. There is a provision in section 8, which deals with persons who might be liable to the tax. That includes people within a chain.  Finally, it is the final consumer. There may be a provision in section 8, which allows the Scottish Government to tax a Scottish customer who is taking the product, albeit that it is being imported from England. I have not made myself very clear on that. The point is that section 26 only requires the appointment of representatives by importers from outside the UK. It does not require other UK importers north of Scotland to appoint representatives to enable them to meet their obligations under the act, under the bill. We will take that up again with other people. I cast make the point—I did mean to declare that I am a member of I cast—about the lack of awareness of Scottish taxes. I wonder if you could say who you think should be doing something about that. Is it just the media's fault that they ignore Scotland? No, it is not the media's fault. We produced a paper a couple of years ago with CIOT, and we have just replicated that last year, in which we have done a little bit of research with the Diffley partnership about how many citizens or taxpayers in Scotland know about Scottish taxes and what they are and who administers them and everything. What we have discovered between the earlier paper and the current paper is that it looks as if awareness of Scottish taxes in general has actually gone down, which was a bit disappointing. Around the time of the Citizens Assembly, we have been speaking to various people in the Scottish Government's tax directorate and whatnot over the last few years about how to get the messages out, to engage the Scottish public and to actually get messages out about taxation, bearing in mind that not everybody reads the Scottish Government's website on a daily basis and all that kind of thing. Surprisingly, I know. It is very difficult for any Government agency to actually work out how to get clear messages across about tax, because, as we all know, people engage with tax when they have to. You do not go to school and become an expert in LBTT. You want to become an expert in LBTT when you have to actually interact with the LBTT process. You buy in a property or selling one or something. That situation in itself means that it is very, very difficult to raise awareness of Scottish taxes. We have regular discussions with the Scottish Government guys about how to potentially get messages across and how perhaps they could do something different with the comms process and engage with younger people and people at school. HMRC, for example, has a series of short videos on YouTube, which, bizarrely, nobody watches. I just cannot understand it myself, but they are called tax-fact videos. We have suggested to the Scottish Government that they might want to produce something along similar lines. Even though no-one will watch them. You could actually produce them and roll them out in schools or in colleges or universities for students who are actually about to enter the workplace for the first time and understand that they are going to have a tax code and blah blah blah. I think that that is helpful. It is a wider question than we might be looking at today, but I think that that is interesting and it is quite helpful. Did you want to come at this point, Ms Devonne or me? Well, it was just to say that I understand one of the effective ways of raising awareness about taxes is to get them mentioned in the soap operas on television, so if that is the route, it might also be considered. I think that I will leave this line of questioning for the time being. If I can move on, the financial memorandum says that part 2 of the bill is cost-neutral. I was interested to know if you all agreed with that. I think that the costs are going to be very hard to gauge prior to the launch of the levy, because with any new tax you have always got training and development to be undertaken, there are administrative costs on the side of the business as well as on the side of government, and there is always a degree of upfront cost involved. Obviously, people need professional advisors, they need to pay fees to their accountants or their lawyers to help them to understand better how to comply with the system and operate it properly. What about the rest of the bill apart from aggregates tax? Would that be cost-neutral, do you think? I do not know if it would be entirely cost-neutral for possibly the same reasons, because if there is additional powers being devolved to Revenue Scotland, I would say that there is a knock-on effect in a kind of Newton's law kind of way where you have some sort of action and then somebody has to actually react to that action, which usually involves some kind of cost. With taxation, what you tend to find a lot of the time is that there is a larger upfront cost until everybody comes to terms with what it is they have to do, and then it settles down. It was the same with the real-time information programme for pay-as-you-earning and AI, but it tends to settle down, but whenever there is a hiccup, there is a cost involved. Do you have either views about the part 2 costs or are you comfortable with them? I would not have thought that there was much cost involved in part 2 at all. The final area that I wanted to touch on was the question of automation, that Revenue Scotland will be able to do more automation. I think that that has got a few people a little bit concerned if the computer is just going to churn out penalties and all that kind of thing.  Do any of you have concerns around that? I think it's probably better to have the use of automation actually contained in the legislation provided that the tax authorities can react nimbly if things do go wrong. I mean, in your example of the council tax bill, you would think that the reaction to that should be to change the system so it didn't penalise people if they only owed a penny type of thing. But there have been a number of cases about whether it is or isn't okay for something to be automated. So, given the society that we live in and the use of computers on such a widespread basis, it does seem appropriate that the tax authority should be able to automate what processes it can. But so long as somebody's looking out and making sure that if anything does go wrong, it gets fixed. Okay, I'll leave it at that, convener. Thank you. Okay, thank you very much. I'll be very quick. Just returning to section 159, part 2, under ancillary provision, I think it was yourself, Eric, in your submission that said in a quote, the ability of the executive to grant itself unfettered powers, which might impose any further obligations on taxpayers, must be contained within primary legislation. Would a finance bill alleviate your concern in this respect? Yes, I think it's a short answer. Okay, short question. In terms of the offset consideration, what do you think about establishing this as a principle, like set, what's being said about the relatively few number of Scottish taxes, but as a principle that one tax can be used to offset another, do you think that there's merit in it as a principle on the basis that we can anticipate further taxes being devolved in the future? Whether it's needed at this time, and there's always a danger with introducing things on a principle basis in tax that you can't really anticipate what taxes are going to come in the future in what order, and so the legislation might not fit what's actually required. But then, as further taxes are introduced, would part of the scrutiny of that not be to how the detail and the complexity of offsetting with a further basket of taxes need to be considered? One thing we have found quite difficult with the devolved taxes is the time that it takes to actually get anything changed, where an issue has been identified, and that's one of the reasons we all are in favour of an annual finance bill type event so that it's easy to get things like that changed, because that's the danger of saying, well, it could be tweaked to fit new circumstances, but our experience is that it's pretty difficult to get anything in the devolved tax legislation changed. Any other further comments about the principle as compared to the inaction from Justine or Eric? My only point on this area, I think, is I wondered whether the Scottish common law of set-off wasn't sufficient already. As a principle, I don't have a problem with it. That's me. Everything else has been covered. Thank you very much, Michael. Before, by Jamie. Thanks, convener. Most of my areas have been covered as well. I've enjoyed the idea of a storyline on River City of an illicit quarry, railing in the miscreants around it, as Mr Dynverno said. I want to touch briefly on section 55 in the automation area that John Mason raised. The Chartered Institute of Taxation had some concerns that there were quite wide range empires around automation, perhaps that they were dealing with them here in short form rather than looking at them in primary legislation, might be the wrong way to go around that. Would you care to comment further on that, Mr Brown? Not really. The more that's done in the taxpayer by statutory instrument, the less transparent, the less ability there is for people to consider it, other than those who are dealing with the statutory instruments. My colleague has already said that there have been cases before tribunals about the use of automation sending out automatic daily penalties. The more scrutiny there is around those issues, the better. Is that a broader issue that your organisations have looked at in terms of the application of artificial intelligence or algorithm approaches to calculate some of those and people's interaction with the taxation system? Not so far? No. I don't deal with artificial intelligence, my friend. Involved to some degree with the Making Tax Digital programme with HMRC and the Treasury. I think the main issues that we have with that is that we don't want everything to go digital at the expense of people who can't be digital yet or don't have the wherewithal to be able to deal by digital means with the authorities, but I would say that what we really need is very clear-cut legislation on exactly how those powers would work and what protections would be there for the taxpayer so that it's clear to everyone exactly what rights of appeal do you have when something goes wrong and how long is it going to take to fix it? Do you feel that section 55 deals with that? It doesn't really encompass what you're suggesting. I think it could probably do to have a bit more thought given to how the powers can be constructed. The main thing is clarity for the taxpayer because the clearer things are, the easier it is to understand the greater the compliance. I think to be fair the section 55 provisions are enabling provisions and my understanding is that following on from them there would be consultation about the use of automation by Revenue Scotland and so there would be an opportunity for everybody to think about it and so hopefully at the end of that process there would be some more detailed legislation which had been widely considered and so on, but I mean if automation provisions were to just turn at next week and be introduced to the parliament that wouldn't be great because it is quite complicated to make sure there's so as I say my understanding is that in the future there will be a consultation about the use of automation. I just wanted to ask, in regards to the financial implications of this, or it seems that we don't have specific data from HMRC on the numbers, the amount of money raised by the UK levy from Scotland. We've had a number of issues in this committee and others around data from HMRC. Do you find that surprising that they're not able to give a more accurate picture? In the FM, the Scottish Fiscal Commission estimates a round about the Scotland's share of UCAL, a round about 60 million raising to 61 million in 2025-26. Do you think that's accurate? My understanding is that there were statistics produced by HMRC, I'm not sure how long ago, where there was a disaggregation of the different taxes across the UK, how much tax was raised in the different parts of the UK. I think that the 60 million for aggregates levy came from those revenue statistics. How more recently information has been sought from HMRC about the disaggregation of the aggregates levy as far as Scotland is concerned, I don't know, but my understanding was that the 60 million came from the revenue statistics on the disaggregation of the different taxes. We've had similar issues with the VAT assignment issue. HMRC does not keep regional statistics on it. It was to try and work out a methodology for assigning VAT to the Scottish purse that was exceptionally difficult in the end. Of course, we know that it didn't happen. It doesn't surprise me that they don't keep regional statistics on this either. There is a case for augmenting the need for HMRC systems to be updated so that regional statistics can be produced. That doesn't just go for Scotland, it goes for all the regional areas of the rest of the UK as well, where devolution is taking place in a number of different areas over a number of different subjects, not just taxation. It makes it harder. If we're looking at the replacing of a UK-accurate levy of which Scotland gets a share, which is determined, and will now, through this new legislation, the money will be raised in Scotland, but the money will come off or will be reflected in budget. How can we be sure that this is going to be of any real benefit unless there is a difference in the amount that is raised? Of course, it has its own implications in terms of Scottish businesses if there is a higher rate in Scotland than in England. You are quite right to raise that. Taking the figure of £60 million in terms of the overall Scottish budget, that is not a lot of money. In terms of the further quirk that there is over Scottish aggregates exported to England and the loss of revenue within that £60 million, that is an even smaller amount. I don't know if it is small enough to get lost in the rounding of the negotiations over the Barnett formula payments. I simply don't know. I do recall that when Scottish landfill tax was first considered, more time was spent. There were only two issues that really concerned the committees in the Parliament. The main issue was what about waste tourism if we have a different rate in Scotland or to that in England as there is going to be waste going up the M74 or down the M74. I am not sure if the same issue arises as regards exports, but I am not sure, given what the industry says about the cost of transport, that putting an extra £10 on the rate is really going to make a difference. Whether it is £1 or £3 again, I simply don't know because the industry will know how their costs are calculated. You highlighted the issues that were exported to England and that money is collected by the UK aggregate levy. Under the UK aggregate levy, what were exports to Europe that you have talked about? Is that covered under that or is that not? Exports to Europe would be exempt already under the UK levy. There is no aggregate levy taken in respect of the rock that goes from Glensanda to Europe, because it is exempt under the UK aggregate levy. It is not calculated in the £60 million figure that was talked about because it was never collected in the first place. A destination country might have its own levy that makes it. I was just wondering whether it was. I suppose that, very generally, unless there is a variation in the rate that would be aimed at raising more tax or environmental recycling reasons, is there any real benefit from this legislation? Anyone can feel free to answer that. It does give the Scottish Government the ability to fashion the tax in the way that better suits Scotland. In practical reasons, where do you say that? The Scottish Government is looking at their website. I do not look every day, but I did look at their website. They rightly highlight that more money is being raised in Scotland, but it is not necessarily more money being raised. It is just how it is being raised. Is there anything, apart from that tailoring, that requires differentials that might impact more widely? It is not my specialist area at all to know how the numbers will play out. However, the experience of LBTT has been that it has been possible to do things in a way that were more suitable for the Scottish law and convencing practice, as the term goes. Is the Scottish Parliament some practice at tax? I will leave it there. I will set a look at the questions that we can put to people like the minister when he comes next week. For example, that is an obvious one to put to him and possibly Revenue Scotland in the next session. Any no further questions? Jamie, we will just move on to Liz. Thank you, I have just one question really. This is about the behavioural change, possibility that has been flagged up to us by other witnesses, and I think that the general message that we are getting is that we are not going to be predicting terribly much behavioural change in the way that people operate. Having said that, are you aware of any behavioural changes that have happened in the UK aggregates levy, which I think has been around for about 20 years, am I right? Has there been any instances of the UK tax changes that has had a marked effect on elasticity of demand or whatever that has affected revenues? Are we aware of any comparable studies there? I am not aware of any. We are not predicting that there is going to be behavioural change. Oh sorry, John had one to come in and I did actually have a note of that. Just one brief thing. We have not really touched on some of the other things that the law society had suggested, things that are not in the bill, and the whole area around LBTT group relief and Scottish share pledges. Now I confess that I do not fully understand all of this, but I think that you are looking for amendments that could have been there, or you are looking for something that could have been in the bill. Have you got amendments ready to go that one of us might be willing to lodge? Not as such, but they could be drafted very quickly. I think the whole point of this is that we are told because of the scope of the bill being devolved taxes of administration, Scotland Bill, the scope of it could not include changes like the ones we have mentioned. However, the scope of the, I do not know what extent it is possible for the scope of the bill to be changed, but there are quite a few things where it would have been an opportunity to include them in this bill, or it could be an opportunity to include them in this bill. However, we have not drafted proposed amendments, but we certainly could do if that would be helpful. It does seem quite wide-ranging to me, so I am surprised that anything is ruled out in a sentence, but we can take advice on that. As long as it does not contradict the general principles of the bill, I do not see why there would be an issue about any amendments. However, that would be a matter for the procedures to decide, I would think. Anyway, as I was saying before, I forgot that John wants to come in with that question, which I did not know of. Are there any other issues that you wish to highlight individually that we have not touched on that you feel should be on the record from this morning's session? I do feel quite strongly about the notion of a finance bill in Scotland. The problem with part 2 of the bill is that there are a lot of miscellaneous provisions in there, and with any luck there might be a couple more. That does not really have anything to do with aggregate tax. When you are somebody like myself and he is down the line, you remember that there was a miscellaneous provision somewhere that changed revenue Scotland's powers or brought something else in or whatever. You cannot find it because it is buried deep in another bill that does not really have anything to do with the subject that you are talking about. However, if there was a finance bill introduced on a regular periodic basis, it would be so much more transparent for everybody concerned to be able to just go to that one piece of legislation and dig it out. Also, if we are talking about engaging with the public and making Scottish taxes more easily understandable, that is definitely, in my opinion, the place to put them. That is an issue that Liz has raised. I have raised it as well. A number of our colleagues have raised that issue, so that is something to take on board. Anything other points that people want to highlight that have not come up so far today? Anything else? Cover the points that are out. I think most of the points have been covered. Certainly we would agree with ICAS that a system in which there was an annual finance bill type event and an opportunity to make changes would be helpful. At the moment, I think the Scottish Government is dealing with six new taxes, if you add them all up, which is quite a lot of new taxes. There is probably a growing need for the finance bill type approach. As well as it being easy to locate where things are, there is a timetable that people can feed into so that people can make representations about things that perhaps could be included in this year's finance bill and things of that nature. I have to say that we did all get quite a surprise when we read the provisions in part 2 of the bill. I think that a sort of lead-in process would have been preferable. I thank you for your evidence this morning. We will have a break until 10.40. During the second part of our evidence session on the Agrit's Tax and Devolved Tax Administration's Scotland Bill, we hear from Revenue Scotland and therefore welcome to the meeting, Elaine Lorimer, chief executive, John McVeigh, programme manager and James Lindsay, Scottish Agrit's Tax Design Project manager, Revenue Scotland. I understand that Ms Lorimer would like to make a short opening statement. I thank you for your invitation to join the committee this morning. We appeared before the committee in December, and we are again very much welcome the opportunity to discuss Revenue Scotland's role in the introduction of Scottish Agrit's Tax and the provisions within the relevant bill. It is my privilege to represent Revenue Scotland today alongside John McVeigh, programme manager and James Lindsay's Tax Design Leads for the Agrit's Tax within Revenue Scotland. As you know, Revenue Scotland is Scotland's tax authority, currently responsible for the management and collection of two fully devolved taxes, lands and buildings transaction tax and Scottish landfill tax. This will be our third devolved tax, and we have worked closely with colleagues from the Scottish Government bill team throughout the development of the bill. Crucial to that has been the close engagement with the Agrit's Industry representatives, and we have again worked with our Scottish Government colleagues in planning, establishing and facilitating the expert advisory group, which has afforded us an insight into the workings of the industry, the challenges it faces and how we made minister and deliver Scottish Agrit's Tax in a way that supports good practice and the establishment of the level playing field, which we are advised is a critical element for the Agrit's community. We have established a programme of work, which has laid solid foundations for the operationalisation of Agrit's Tax. Our programme team has been in place since the last year with the underpinning projects to find and initiated, and our programme board will meet for the fifth time this Thursday. The board includes representation from key areas, both internal and external, to Scottish Government, and supports our head of tax, who is unfortunately not able to be with us today, in his role as SRO. We have clear governance and escalation roles that are established to support effective decision making. It is important for the committee to know that we will benefit from the rigor of gateway reviews and digital assurance mechanisms to make sure that our delivery plans are robust and that our approach is in line with the expectations of a modern, digitally-enabled public body. We are shortly entering our tenth operational year as a tax authority, and our ethos in delivering this tax will be informed by our experience to date, as well as looking to embrace the opportunities that technology and data bring. Work is under way and gathering requirements for the development that is necessary to our tax collection system, and we are about to commence discussions with industry representatives on more detailed requirements such as the design of the tax return. We have plans in place to continue this engagement through to delivery and beyond. User-centred design, as I hope you would expect us to say, will be a key component of our work, as we will be making sure that by the time Scottish Aggregates tax goes live in Scotland, taxpayers, their agents and Revenue Scotland, is ready. We also welcome the measures that are included in part 2 of the bill and see them as responsible and mature technical measures that reflect the changing landscape for tax administration in Scotland. As I said in my written evidence to the committee submitted last week, we work closely with the Scottish Government to support and implement legislation and changes in line with the Scottish Government's policy aims. The measures in part 2 reflect an aspect of that joint work on technical and future proofing matters that will support the establishment of Scottish Aggregates tax, while also ensuring operational coherence across the devolved taxes. We are delighted to have the opportunity to engage with the committee today. I look forward to sharing our progress today, our plans in place and hopefully being able to answer your questions as fully as possible. Thank you very much for that very upbeat and interesting opening statement. I am just going to refer to that first of all as I ask questions and open out the session to colleagues around the table. You have said that Revenue Scotland has worked closely with Aggregates industry representatives and we have talked about how they have emphasised the need for a level playing field across the UK. However, of course, other people have a different view on that. For example, the Scottish Environmental Services Association and Resource Management Association Scotland argued in favour of an increased rate of tax in Scotland to incentivise a wider adoption of recycled aggregate and ask where possible for the two Governments to work together to bring about a UK-wide increase in the aggregate's tax and levy if it is initially they would like that, but if not, they would like Scotland to increase taxation on non-recycled priming aggregates in order to fulfil the Scottish Government's objective of switching more production and sale and usage to secondary recycle products. Have you had much contact with organisations like those? We have, convener, and if we are looking for more information on our engagement with industry, both John and James will be able to provide that. In relation to the point about level playing field, what we are hearing from the aggregates industry is how the existing tax operates in Scotland and we are hearing that from some of them they feel there is a lack of a level playing field and that is as a result of non-compliance with the existing tax regime. Where we think that we can make a difference in Scotland is going to be in relation to our approach to compliance and that starts from making sure that the taxpayers and their agents understand their obligations irrespective of what the tax is, what the rates and bans are, and then from our perspective it is making sure that through our compliance work the taxpayers know what their obligations are and they pay the right amount of tax. What we are hearing from the industry at the moment is that that is not consistent across the industry in Scotland. The level playing field that the industry is looking for is one whereby everybody is adhering to the tax regime that is in place so that they have a level playing field for competing for business. That is the point about level playing field, but in relation to the engagement with the industry representative bodies if you would like I can bring Jameson who can talk about that. We have had close work in relationship with the Scottish Government as part of their stakeholder engagement throughout the bill process, the development of the bill and they introduced a working group that brought it together a lot of different parties including the body that you mentioned there. We have had discussions with those environmental bodies at that point in time. A lot of our focus has been on compliance of course and the calculation and payment of the tax, which of course those environmental bodies they would not be, they are exempt from the tax from the exemption provided within the bill. Our engagement has been through the Scottish Government's stakeholder engagement at this point in time. We are actually talking about, I think, we are conflicting two things here really. One is the issue about whether the Scottish aggregates tax when it comes in will incentivise the switch to recycled secondary products so that there is less natural produce. The other issue that she mentioned is compliance. I think that everybody around this table wants those who are actually producing these aggregates who are not currently paying taxes to pay those taxes. I think that that is absolute. I think that everyone in the industry who is legitimate in doing that, so I think that I recommend that the Revenue Scotland are determined to ensure that that happens. I will switch back to that in a second, but with regard to the initial question that I was asking about, a differential in taxation. We appreciate, of course, that recycled products will not be paying taxes. There are issues about whether or not, for example, local authorities should be paying the taxes. There are other issues, but one of the things that, for example, happened with landfill tax was the whole idea of trying to encourage a change in behaviour. That has happened over a UK basis, but the taxes have never varied between Scotland and England. The policy memorandum says that it is to ensure that the devolved tax can evolve over time to support Scottish Government circular economy objectives. It goes on to say that it wants to encourage the maximum necessary exploitation of primary aggregates, maximise the use of secondary and recycled aggregates and incentivise innovation in developing the development of alternative materials. The tax on aggregates has been £2 a ton since 2009, regardless of inflation or the rest of it. It is going up to a thumping £2.3 next month. Is that happening? How will £2 a ton across the board in Scotland, the same as England, possibly have any impact on behaviours, which is what those who wish to see more recycling products want to see? Obviously, the setting of rates and bans and the policy behind the tax is not within my remit. That is for ministers and for Scottish Government. We are aware of what the industry is saying there in terms of supporting the circular economy and how the powers that are being devolved to Scottish ministers could be used differently, but it is for ministers to determine how they wish this tax to set off. It is clear at the moment what they are looking for is parity. I appreciate that and I realise that Revenue Scotland is there to implement Scottish Government policy. From your opening statement, it appears to be—I might have read this wrong in terms of your submission—that the effect is almost the same. We will go ahead with that rather than querying whether that is the right thing to do and whether the ministers are being advised that this is a way forward. Ministers do listen to what Revenue Scotland has to say. It is not a one-way conversation. Our involvement in the discussions around the policy within the bill have been more around the management and administration elements of the bill rather than rates and bans and what you might do in relation to that. That really is a matter for ministers. Our role will be to implement whatever it is that Parliament chooses to pass. I will put those to the minister next week. For my financial memorandum, Table 1 says that in the current financial year, £60 million would be raised in the next five years. That will increase to £64 million, which does not seem to me that many, if we assume that taxes remain the same, there will be much switch to secondary products at all. It looks almost as if it is as steady as it goes. Is that unacceptable? That is a reasonable assumption from looking at the financial memorandum. On the basis of our understanding of what is within the financial memorandum and how the taxes are expected to be introduced at this stage, the projections that are there in terms of revenues are in line with what you are saying. The other thing that I think was music to your ears in terms of compliance. One of the things that we have tried to grapple with is the size of the scale. As I mentioned in the earlier panel, it is not as if Scotland is a huge big country where you can hide thousands of quarries everywhere, such as Canada or Russia or something like that.  It should be pretty easy to know where all the quarries are and who is paying tax and who is not. If you have any idea of the scale of the challenge in addressing those, what is going to be done to ensure that they actually do pay their whack? The tax is going to be different from us for us to administer in comparison to the other two taxes that we have, because of the geographical spread of the industry. There are five times more taxpayers for aggregates, as we expect. There is for landfill, for example. We expect there to be around 350 known quarries, as opposed to a much smaller number of landfill sites. In terms of our approach to compliance around us, it is going to have to be slightly different. We will want to make sure that we have our ear to the ground geographically around Scotland, because there are quarries all over Scotland, including the island communities. As part of our compliance approach, we will want to use as much technology as we can to identify where quarries are and to work with taxpayers directly to understand their industry. Basically, get to know the industry really well so that we are able to undertake our compliance in a proportionate way. However, the difference between this tax and landfill tax, for example, is that it is going to be similar in the sense that we will be engaging with business as we do with landfill tax, but where it will be different is the geographical spread. Surely we will be at 32 local authorities. They must know which quarries they have in the area. Surely that will be the first point of contact with which quarries they have, and they can check whether registered and paying taxes are not or whether they are and then actually can be taken. I really thought it would be that. It is not that you have got to fly a drone all over Scotland in these lines to try and get them and then check off a list. Everyone must know if they are quarried at the end of their street. Exactly. We will not be doing this in isolation. Our approach with all our taxes is to work in a very collaborative way. What we have identified with this industry is that there are a number of key players within it that we will want to be working closely with. Local authorities are absolutely key to this for us. It is not as if a Revenue Scotland will be sitting in isolation so we have identified other key stakeholders such as SEPA, such as the Health and Safety Executive and local authorities to name but three. We will be wanting in our compliance approach to be engaging with all of them. What is the general sense of the scale of these unregistered quarries? Even though tax had been in for 22 years, it is not paying any tax. I was going to ask James or John. Do you have any idea what to go on, John? I could not comment on the scale of the unregistered quarries but what we have heard quite extensively from the industry is that this can manifest itself in a couple of ways mainly where one being quarries which have extended beyond their boundary and are continuing to quarry outside that permitted boundary. Another problem is almost like a pop-up quarry where materials are taken from a farmer's field used in construction and then the field filled back in. We are aware of those two types of issues. The evidence that we have heard from the industry representatives is that the result of that can be their competing for tenders with contractors who are not using registered sites and are not paying their tax. That becomes very difficult for them to compete when they put their tender. We have heard of that since the programme commenced last July. That has been a regular topic of conversation with the industry representative. The feeling that we have is that it is quite a hot topic and that it is quite extensive but we do not have that detail as yet. Those are two examples of how that can work in practice. It seems to me to be a bigger issue than a cross-border issue. We would visit a secondary quarry, such as a processor, if you like, of recycled aggregates. They said that because of the cost of transport, we do not even sell in perhaps too far away terms of the money that they would make. Given the fact that the border lands on both sides are fairly depopulated and do not use much aggregates, it would cost so much to export those cross-border things a bit of a myth. The only place that would really be an issue would be if you were actually shipping it in big quarries. How much of an issue is that? In section 4.15, we are working with stakeholders, the bill team and HMRC, to identify the different types of cross-border arrangements in order to establish the most effective and efficient way to administer the tax in those situations. What those effective and efficient ways to administer are following your deliberations? We have had close collaboration with the Scottish Government, HMRC and industry stakeholders in order to establish the different types of arrangements and different types of cross-border transactions that can occur. We are currently looking to set those out and, as part of our compliance strategy and processes, the best ways to deal with them. At this point in time, we are very much in the investigatory stage to try to establish what are the biggest risks with regard to cross-border, and then, down to the very minus show of the different types of arrangements that someone could be administratively difficult for them, so that we can make sure that, when that tax goes live, we have the best process in place to deal with it. Do you have any evidence that I don't know or otherwise that, if the tax went down a pound, for example, Scotland would just flood England with all those aggregates because it would be saving a pound a ton. Or, if it went up to £3, would there be the opposite and Scotland would be flooded? Or, would there be a very little difference? Of course, the difference would be that, if it was an extra pound, it might encourage more people to invest in recycling facilities and bring more money in terms of revenue to the Scottish Government. Where is the elasticity in that? We do not have any specific data on that. As you say, it would be anecdotal at best. Given the fact that we have a bill in which we are trying to devolve this tax and try to take the optimum level of revenue, is that not something that is fundamental to trying to ascertain in terms of the cross-border movements? The impact of tax changes in Scotland relative to the rest of the UK on our revenue streams? That, again, is a matter for our colleagues in the Scottish Government and ministers to take a view on. It is perhaps something that you might want to talk to the minister next week. No, it is not about to take a view on a policy. It is about what is the actual, surely revenue Scotland, have an idea of what the impact would be of that. If you are going to be collecting the revenue, surely you have an idea, you would be sent to ministers. If we actually raise or lower the tax, this will be the impact in terms of the revenue that we expect to come in, or not, as a case may be. In that situation, we would do our best to be able to provide information to the minister on the basis of our knowledge of the tax at the moment. That is early days for us in terms of understanding the industry and understanding how the money flows work within the industry. It is perhaps a question that is a bit early for us to be able to answer right now. It is a sort of thing that, as we build up industry knowledge, we would be much more expert in being able to provide a view. Ultimately, forecasting is not for us. Forecasting is for ministers and, obviously, the Scottish Fiscal Commission would also provide information in relation to the tax at this point. I note that the financial memorandum includes £25,000 for the Scottish Fiscal Commission to specifically do that forecast. I appreciate what you are saying there. You have said in section 5.4 that you talk about the Scottish Parliament enacting a legislative scheme with teeth to challenge non-compliance. What kind of teeth would you like to see in the bill that may not be in it at the moment? Basically, at the moment, in relation to the compliance powers that we have, they are set out within the Revenue Scotland Tax and Powers Act. We believe that the compliance powers broadly that we have within that legislation will apply for us here. There are some specifics that we are seeking for changes to, which is related to in part 2. I am going to turn to James, just in case there is anything else. There is one specific provision, I think, because they are not in relation to it. I think that the reference to the teeth there was a broader reference to the as you say, the Revenue Scotland Tax and Powers Act in the bill for the penalty regime, for example, as an example of the teeth that the powers legislation has. In terms of the bill itself, we welcomed an introduction by the Scottish Government of a provision. I think that it is section 8, Subjection 5, from memory, which seeks to deal with some of the non-compliance that we talked about earlier, with regards to unregistered taxpayers. That will help us with our compliance approach, and I think that the state part 2 provisions are there as maintenance and are there to help us with efficiency and administration. In terms of the part 2 provisions, I mean that you will be aware, because I am sorry to sit up at the back, James. Of the concerns that have been raised by previous panel, the Charter of Taxation, the Law Society of Scotland and the Charter of Accountants of Scotland, who talked about the fact that the lack of safeguards for taxpayers in such a situation, whereby, particularly in terms of whereby, if you fail to pay a tax in aggregates, you may, therefore, may impact on other taxes that you pay. What is your view on that? Those are the provisions that you are referring to in part 2 provisions. Is this the set-off provisions in particular that you are referring to? I understand. Set-off is something that we believe would be a useful additional clarification of our powers as a tax authority. Essentially, where set-off would come into effect would be where there is no dispute about the amount of tax that is due by the taxpayer. However, what we would like to be able to do is arrive at a position where we could set off that amount that is due against other revenues that we are holding. Essentially, it is to arrive at an agreed net position in relation to the taxpayer. As regards set-off, the protection for the taxpayer there is that the amount that is due is undisputed. We have agreed it between us. I think that the other thing, too, in relation to the provisions that we are seeking, particularly around set-off, is that we have to look at those in the context of how our organisation operates generally. We have a really strong reputation for acting proportionately. It is a discretionary power. We have our charter of values that we are held to account to in terms of our operations, which the ombudsman regulates us around. There is no suggestion, certainly, from our part here that the provisions in relation to set-off would be something that would be a sort of heavy-handed power for us to have. We are also conscious that other tax administrations within the aisles have set-off in legislation. We think that we have common law powers in relation to that in Scotland. The issue that we have with that is the lack of certainty and clarity for taxpayers. If it is set-out in the legislation, there is no dispute or no doubt about the ability for us to arrive at an arrangement such as set-off. It seems to be very rarely used, in the actual fact, to where it exists at the moment. I just want to ask two further questions before opening up to colleagues. It goes back to this issue about 350 quarries. You have said that there is a 150 current UK tax base when identified or like to be a quad to register for SAT. I take it that includes people with multiple quarries. That is not like 150 plus 200 illegitimate ones, so to speak, because you do not know how many of them there are. Would that be right in saying that? I just want clarification on those numbers. In my last question, I realised that it is also about clarification of numbers. It is just with regard to financial memorandum. In table 3 of the financial memorandum, there is a summary of estimated revenue of Scotland running costs for the first year of SAT. The numbers are all very rounded to me. For example, amortisation, which is a great word, the spreading of the costs of an intangible asset such as an IT system that is £200,000, operational staff costs £645, operational non-staff costs £60,000. That is saying that once this is all done and dusted, the costs would be about £905,000 a year. I am just wondering what the parameters are for that. How accurate is that to be within 5%, 10%, 20% of the limits? How confident are you that the figures on the financial memorandum are accurate for the set-up costs and importantly for the on-going operational costs? Obviously, the costs that we have built up here are based on our knowledge of what it costs to run our existing taxes. It is based on our understanding of what is going to be expected of us in terms of administration at this point in time. It is being looked at very carefully, recognising the constraints that the Scottish Government is under in terms of funding. We have had to be prudent in what we are seeking here. John knows more detail, so I am going to hand over to John in case there is anything else that you want to add, John. The staffing costs are broadly based on, as Elaine has mentioned, the two existing taxes that we operate. Again, the assumption is based on the Scottish aggregates tax broadly, which is similar to the UK aggregates levy. Given what we know to date, we are confident that the staffing costs and the timeline that we have for implementation are fairly accurate, but we need to keep revisiting that as a legislation develops. In terms of the implementation costs and the first-year running costs, we are comfortable with the figures that we have put in the financial memorandum. Comfortable, is not he really very numeric from my perspective? That is why I am asking, is it a 5, 10 per cent conference limit, 20 per cent, what kind of ballpark are we talking about? Obviously, financial memorandum has to be best estimate, so I am just wondering how confident you are. The unknown here for us, if I am honest, is what happens with pay. Our biggest cost is our staff cost, as you can see. That would be to these prices, obviously, wouldn't it? And what we know around the pay deal. That is where our risk is, if you like, because this will depend on future negotiations that we have with the Scottish Government around our funding for our staff costs. We have not built any cushion, if that is what you are looking for. No, I am not looking at cushion. I am not saying—I am just saying—these are all—these figures are accurate to what degree, effectively, because that is what we are trying to say. We are actually financial memorandums, as you are probably well aware, where we have changed by hundreds of millions of pounds over the weeks of our year. That is why I am trying to pin you down a wee bit to say, well, it may go up or down 5 per cent, but we are absolutely confident that these are the figures rather than figures that this time next year could be completely different. No, sorry, convener, but let us just to come in with more certainty for you. No, those figures are figures that we are confident that we can live within. They are small. Our staff costs, for example, if we are confident that this is the number of staff that we would require. The only variable there is going to be if there is something that we are unaware of that happens in relation to pay arrangements. Our non-staff costs are a small amount, and we have flexibility in there to keep that within control. Amortisation is an accounting treatment.  Yes, which is obviously based on what we believe the cost of the system is going to be. I can say to you with some certainty that we think that these will be the operational costs that we need to live within. We can manage it. One of the points that the Chartered Institute of Taxation raised was that they thought that there might be a bit of confusion when we start off with a new tax, because operators who have just been used to the Kingdom tax are suddenly going to have to do either both or just at the Scottish one. Can you say anything about how you would be thinking about raising awareness in the industry? I can certainly start off with that, and James and John can both come in. One of the benefits that we have with the introduction being in 2026, as is currently planned, is that the parliamentary timetable for legislation is as is currently planned, which means that we should have, hopefully, the secondary legislation in by 2020, March 2025, gives us a full year for really active, proactive engagement with the industry. As we have said in my opening statement, what is really important to us is that we make sure that the industry is ready and understands its obligations. If I can draw from our experience from our other taxes, we have done that through a variety of means. We work through the representative industry associations, we will be running webinars and outreach events to taxpayers that they can come along and they can find out more about the tax, we will be engaging with the professional bodies, we will be doing a whole range of things. What we will also have to do part of what we will also be needing to do internally is making sure that our guidance, our taxpayer guidance, is available on our website early enough, so we have a strand of the programme that will be working on that, so that in good time we have our website updated, we have our guidance updated and then it is a lot of outreach to the taxpayers to assist them in their understanding. However, it is clear that, with it being such a change, the communications and engagement with the industry and the representative bodies and professional advisers is going to be really important here. Is that what these go live events are, it says, from January 26 to July 26? Yes, absolutely. And an operator based in England who isn't even aware that we're going to have a new tax, how will they learn about it? Yes, well that's a subset of a challenge, if you like. So again, our outreach is going to be really important there. I don't know whether looking at James it looks like he can come in. I'm sure we'll be able to use our relationships with HMRC to help with that, but James, do you want to come in? You picked up on the point that I wanted to raise that, yes, we've had good relationship with HMRC so far and they've been quite a collaborative relationship and there will be points, a joint points of work such as communications with taxpayers that we'll need to address together. So HMRC will be helpful in able to identify those taxpayers that may have to register for the Scottish Agritist Tax based in England and through that understanding we'll be able to have a joint comms approach which will help identify the taxpayers and make sure they understand their obligations before that tax goes live. Yes, we could come in as well. We've worked closely with our colleagues in Scottish Government in the bill team as they've put together an expert advisory group and we've been part of that advisory group and we've also developed a comprehensive stakeholder engagement plan which at the moment we are probably a little bit in the background with Scottish Government bill team leading because of where we are with the programme but we have a fully developed engagement plan in place and our intention is to utilise that advisory group right up till go live and beyond and keep that relationship going with the industry because it's been extremely valuable to us. Okay, now you say that the tax return is going to be a bit different from the one that's used for the UK system and I think there's going to be more detail in our tax return can you explain why that is and what's going to happen? Yeah, certainly our intention at this point is to seek slightly different information than what is already provided by taxpayers for the UK tax. The committee will be aware of our really strong record in relation to data and the data that we publish as an organisation and we also find that of course the data that we have access to really helps inform our compliance approach so the rationale for us seeking slightly more information on the tax return is to assist us in our understanding of the industry but also to assist us in our compliance work that will come forward. I'll hand over to James though because I think the other thing too that we want to make sure is that we're not placing an unnecessary burden on the industry so for us it's getting the balance right between the information that would be really truly helpful for us to have and making sure that the industry is not unduly burdened by us so James you can see what's done so far. Again you've covered a lot of the points that I want to discuss but I would say that in balancing off the information that we want so for example what's currently asked for is part of the UK return we've evaluated that and then looked at how the for example the tax is calculated and is part of the tax calculation some of the key areas are exemptions and reliefs that that forms that then there's quite a lot of relief and exemptions to think about and they can relate to compliance so we've considered as part of the return it might be valuable to ask for some more details about those exemptions and reliefs. Now balancing that against as Elaine says you can't be overly burdensome of the taxpayer but currently although not provided in the UK return the information has to be retained by taxpayers legislatively there's a requirement for records to be kept plus through engagement of going to the quarry sites and looking at the processes and how managed they've got to be about what's on their site what goes out their site because it's low value high volume systems so they've got to make sure they understand the materials and the profits that they'll make we're quite confident that they'll be able to ask for information that the taxpayers will be able to provide with ease and they'll have work with stakeholders throughout the process so we'll design the return we're designing our system and it'll be a collaborative approach with stakeholders to ensure that we meet that balance okay thank you another point the charter institute made was that there could be double penalties in some situations in that a quarry operator could be subject to penalty of 100% of the tax but also so could a customer and they felt that was a bit harsh to be penalising both 100% yes that's in relation to specific penalty for a tax credit in relation to prescribed industrial or agricultural processes so on review and as part of our advice to the scots government for stage 2 amendments we're looking to advise that that penalty should be removed and we're all going to rely on the already existing RSTPA penalty so our existing tax framework penalty which deals with the information supplied by third parties to a taxpayer that might be incorrect so that issue should fall away okay thanks for that so in part 2 of the bill there's a few issues one being automation that i think the government would be able to give you powers to do more automation can you say anything around that and what protections there would be because some people do like a bit of face-to-face and personal interaction as well as computers yes of course understand that totally so the obviously as you've identified the the bill is setting out powers for the minister to bring forward regulations in relation to automation so obviously there would be as i understand it would be through the affirmative procedures so there would be consultation and discussion as part of that automation is one of the things that we really want to have access to as an organisation to properly harness the benefits of the technology that we've got but we're also a tax authority that has got to make judgment calls and decisions on on sometimes quite complex tax matters so our need for automation our use of automation as we see it at this point is going to be at the very straightforward end of our processes where there is no doubt about a basic penalty being due because a date that was due to be met has passed and a return hasn't been received for example so it's things like that that we are interested in introducing automation for because it will keep us efficient it will mean that i don't need to as we take on more taxes i'm not needing to build up teams of people unnecessarily and it means that the staff that we employ can focus on more complex work richer work if you like for them as individuals where we are training them in terms of you know the sophistication of our tax legislation how to how to deploy judgment in relation to the case where i'm pretty sure we're all sympathetic to that i just i think we've been given cases in the past when we've looked to ai that you know sometimes if there's not enough human oversight things can get run away and as i mentioned to the previous panel you know i've seen constituents who were a penny short in their council tax and then they get these horrendous letters from somebody you know can you give us some assurance that we're not going down that route well i would hope we're not going to go down that route we certainly wouldn't be designing automation with it to come out with that sort of result at the end of it and i think what i would say is that one of the things i have learned in this role is that sometimes things do go wrong we won't always get things right and i think what matters to us as an organisation if we were to issue a letter such like that in error we would make it right with the relevant taxpayer and our whole approach would be one which was empathetic with the situation that we had landed them with but certainly in the way in which we would design any of our automation of our processes we would be looking to make sure that sort of error wouldn't occur okay thank you and the final point on a different area in the law society's evidence concerning group relief and de-mergers they effectively said the hmrc guidance overrules the strict letter of the law but revenue scotland has not been able to give the same it's not proof possible for revenue scotland to get your guidance which is the same effect as for sdlt can you explain anything about that certainly i would never have thought our organisation would have the powers to issue guidance whichever which overrules the legislation that this parliament's passed our guidance is to i mean i have to hmrc is a bit of a reputation for doing that well i'd like to think our organisation does not but i'm we're aware of what the law society is seeking in terms of those other amendments clearly that's a matter for ministers as to whether they wish to bring these forward my team are telling me that operationally should should these changes be brought forward they are they are not going to create a significant operational issue for us thank you thank you you said in answer to the convener that one of the advantages you think this devolved tax will have is that there'll be better compliance as in picking up some of the people who've been going through the loopholes and that's obviously very good news for extra revenue in your opinion given what you know about the UK tax living which we've had for around 20 years do you foresee other benefits from this devolved tax that will actually likely raise the revenue from what exists currently our hope would be that through the compliance work that we will do that we will we will improve the revenue situation at the moment though because we don't know enough about the industry and because we haven't gone out and visited every single taxpayer and we haven't engaged across the whole of scotland with all the different local authorities the level of non-compliance to us is at the moment it's not i can't put a figure to it it's not known what we're hearing from the industry is that in some areas it's really quite significant so i think where we can add value initially is going to be around our approach to compliance and making sure that the taxpayers that we have that we know are paying the right amount of tax and then we'll broaden our reach out to find those taxpayers who are should be taxpayers who are not paying the right level of tax so in relation to the work that mr lindsay spoke about where revenue scotland was obviously speaking to hmrc has the latter has hmrc flagged up any issues where they're obviously concerned not well can i'll take it first james i mean james can answer in relation to have hmrc raised anything but i'm not aware of that james might be able to tell you whether they have or they haven't certainly from what i understand so the industry have raised issues with us which we have passed on to hmrc i think that's the right way round isn't it yes or so we do speak to hmrc in the compliance team and the policy teams to cannot understand how they do things at this point in time what's the landscape like what's the tax administration compliance like but i think i would like to stress that the willingness to engage from industry stakeholder from from over the last 18 months has been really welcoming and helpful the compliance issues that they've raised with us are clear and i think that we could have a really good chance to have a good impact to deal with those compliance issues i'm confident that we can and i'm confident that the impact that we'll have and the real benefit that we can bring to the table here is that we can improve that sector by dealing with those compliance issues dealing with that non-level playing field that it seems that it bothers them and it can have a real impact locally for businesses, businesses jobs that all all the things that are really important so there is real benefit for this tax to be involved in the real benefit for us that we can bring to the table i mean that's all very encouraging because i mean the bottom line here is that you know if the tax to be successful this has got to be good compliance it's got to be seen to be fair and people understand what it's for and also you know in terms of raising revenue it's vital that you know that there are some benefits from that revenue raising aspect that's obviously the basis for why the Scottish Government would like to introduce it my second question is one that came up in the earlier session that's been around this committee for some time about the possibility of a finance bill which allows or would allow the Parliament not just this committee to be able to scrutinise taxation a bit more fully there is currently the case and with greater clarity and understanding that is that something i know you can't comment on Scottish Government policy but is that something that would help the process of getting more people to understand what's going on? oh i think so yes um uh this has been something that i have been asking for for since i arrived in this role um which is a while ago now um i really think as part of a mature tax system in scotland we need to have the ability to keep our legislation up to date we need to have the ability to keep it up to date from a technical perspective and some of the part two pieces we've got here you can see why we're looking for it for automation for example but there's actually also there's a need to keep the substantive the substance of our tax legislation up to date too and without a regular vehicle to do that we run the risk of our tax legislation falling behind or our ability to ensure proper compliance our ability to ensure fairness across the system to be brought into doubt and so as an organisation we are really keen to have that vehicle and much of the changes that we would like to see are i would describe them as boring technical but nonetheless important boring technical can be good boring technical can be good that's right so i really i i don't think it's something that we would require of annually but we certainly need to have a vehicle and at the moment we don't have that and the longer we administer our taxes the longer the list is going to become of the issues that we want to see changed that's very helpful thank you thank you and we would never describe michelle as boring technical michelle why did i know there was going to be a comment about that thank you convener perhaps i mean a couple of areas are interrelated we heard it from our earlier panel some concerns about offset or set off i think you described it off describing it as heavy handed now what i asked was that but surely you're establishing a principle a principled approach in anticipation of further taxes being devolved that we're people oh tax that we should be able to claw that back am i correct in my assumption yes i would say you are and so essentially that that particular provision what we are saying is we would like to have that clarified in legislation now because we would like to have it for aggregates but we would also like to have it for all of our taxes and you can you can we know that we can anticipate that we will have taxpayers that uh our taxpayers for more than one tax for example we can anticipate that we'll have landfill operators who also run quarries so it just makes sense for us to be able to have that and i i hope the assurances i gave earlier around certainty around the amount that's due that not being in in in doubt between us and you know the fact that we would act proportionately is is sufficient assurance to you to for you to feel that you could enable us to have those powers set out in the legislation and following on from that i think it was the law society that commented that yeah but further taxes might not align directly and that is true but i suppose i think it can't be beyond the wit of yourselves and parliament to design legislation that takes account of that and i suppose following on would then the principle of a finance bill allow for the sort of scrutiny that you would want to see of how you can continue that offsetting bless you that offsetting approach i mean certainly we would like the provisions that are within part two past obviously as part of this bill but yes for ongoing maintenance of our operation of that of those provisions because it would be enshrined because the set of provisions are within primary legislation yes we would if it can't be amended by secondary legislation a finance bill coming forward would provide us with parliament with the opportunity to scrutinise our utilisation of that power in due course yes thank you thank you jimmy i've just got i just wanted to get back to the compliance issue that the convener and listmith raised i appreciate you can't give a figure for the for the exact number but you have talked a little bit about some of the areas i think mr mcgwey you talked about farmers except perhaps providing aggregates kind of under the radar i can assure you for 100 say 100 tons was taken off my land it'd be pretty obvious to folk um but when we're still not talking about huge numbers for example if 100 tons was taken by understanding that would be 200 pounds of tax so it'd be interesting to see how that would how that would almost be worth the risk for for someone i just wondering if you have any idea because everything seems to be very anecdotal so far um on that any idea in the split between some of the smaller um the smaller uh kind of non non-compliance issues and some of the larger ones because that's the convener rightly pointed out this isn't a big country you know you know quarries are pretty obvious they can't be moved or hidden very easily so do you have any idea of the the balance balance between the two i'm not sure we have at this stage i'm going to look to james just in case he does in terms of quantitative data we don't we don't have anything substantial at this point in time but in terms of qualitative data from the industry stakeholders they've been very clear that the impact is quite great for them and that there is an issue to be dealt with that is currently not being dealt with um so and then we have seen evidence of quite large scale to some degree um unregistered taxpayers that continue even not just as pop-up as my colleague mentioned but i continue for years um and one thing maybe to point out is that although quarry sites can be big they can be hidden so it can be hidden in plain view you can't see them off the off the road so you've got 200 yards down the road and then you've got a big big hole that's been dug out and a lot of aggregate that's been taken from it and that won't be seen by the public for example but it is felt by industry and it's felt by the community because a community might only have for example say three quarries in it say a local authority and if someone's under cutting them they know they so that's the benefit for us that the industry they can be a you know years to the ground that we can use them and they're willing to engage with us on those points so when as part of our stakeholder engagement and after the task was live we'll work with them in order for them to tell us because they'd be quite willing to come to us to say that that you know that quarry down the road it's under cutting us can you help us with that i mean i mean depending on what kind of community in a quarry operating will have impact and people will know that it might not be seen from the road but the trucks will be seen just but on on that point why is it why is it you think the industry is it will work with you and you will have more impact or you'll be more successful in dealing with that then than under the previous UK aggregate welcome in there i think i think it's simply because we've reached out and because we because they're aware of our the impact we've had in other industries in scotland and i think they recognise that they've actually got people that will come out and visit them and people that will speak to them and i think we have to remember that the and this is no criticism of hrc at all but you know UK aggregates tax in the wider scheme of things for the for hrc is a is a small tax so you know with it being one of the benefits about it being devolved and for us to operationalise it as we will it will be our third tax so it will get the attention that you would expect us to give it and how do you how will you decide the kind of cost benefits of that of pursuing unregistered quarries or like because obviously it will be expensive or it could be expensive and the benefits may be small other than the general approach to ensuring people that should be paying tax are but so how do you how do you think you'll do that and and what kind of resource will you be able to put to it yeah so the so the resources that we are hoping to deploy to this tax we've set out in excuse me we've set out in in the financial memorandum our scotland government have set it out on our behalf in the financial memorandum in terms of the approach we take our starting point is that we would expect everybody to pay the right amount of tax obviously there comes a point though when we are looking at our compliance approach we do it on what we call a risk basis so our starting point will be to go for where the greater risks are and it's only one so that we have got those risks resolved will we move to the lower level risks so we take a proportionate view in terms of where we deploy our compliance resource at the end of the day though it's incumbent on us as a tax authority to if we if we are aware of non-compliance we have to do something about it we can't turn a blind eye to it but we take a proportionate view about where we deploy our resources so that we are tackling the greatest risks of non-compliance first and i mean do you have any estimates on on the the kind of cost of non-compliance at the moment the cost of non-compliance do you mean in terms of revenue loss no i'm not able to provide you with that i'm sorry okay thanks the law society said in the evidence that arrangements for penalties and appeals should reflect the desire to ensure compliance rather than being used as a mechanism to raise revenue and that the penalties should themselves be well publicised as part of your engagement with industry is that publication of those potential penalties and consequences for non-compliance being communicated and you feel that the balance is being struck right at the moment between that desire to improve compliance rather than unnecessarily being used to raise revenue yes the penalties regime the penalties regime that's set out in the revenue scotland tax powers act is a pretty complex regime and so from and that is the regime that will apply here so yes absolutely we will be making sure that the industry are aware of the the penalties regime and how it applies to them it starts with making sure you get your tax return in on time if you get your tax return in on time you're off to a flying start where our penalty regime becomes more complex is where it's you know that it's not in on time and then you know it continues and continues and continues and you become you get into a into a very complex calculation in relation to what is due in terms of penalty so yes our starting point will not be to at all use the penalties regime to raise revenue we would much rather we weren't issuing penalties if we weren't issuing penalties it would mean that tax returns are in on time and the right amount of tax is being paid so you're right to identify that what we need to be able to do is engage with the industry because the penalties regime is one of the sticks we have as a tax authority which we would rather not use it would be better if they understood what their responsibilities were early on that our system made the making of a tax return straight forward for them they knew what they'd put in in terms of their information on that tax return they do it on time there shouldn't be any need for the penalties regime to apply that's great are there any other operational issues especially in the early days of the scheme being being live that you foresee sometimes there have been issues for example getting data across from from hmrc as well as other issues is that something that you foresee is potentially being an issue or are those being worked out at the moment no we will we will i might bring in john here we will bring we will as we have with our other taxes we have formal arrangements with the hmrc for sharing data we are in part to do that under our legislation it's very tightly constrained obviously because what we're doing is essentially sharing information about taxpayers we'll have that for this tax and the same as we have for our other taxes so our intention would be to have that sort of arrangement in place specifically i don't think though john we're expecting data to transfer at the start of this are we we're starting from scratch yeah working closely with hmrc at the moment and obviously putting together a joint plan for the smooth transition for go live so yeah good communications with hmrc up to this point that's great thanks convene thank you very much jillian that's exhausted questions from colleagues around the table i'll just say that compliance does of course of itself for surely increase revenue even if that's not the reason for it i mean one of the issues i think at the moment that we're grappling with apart from things like lack of data and we don't really know how big the issue is is there doesn't seem to have been much in terms enforcement over the last 20 or so years i mean you said yourself there's a small tax but individuals get chased by hmrc for just a few pounds sometimes or so it seems to me odd that you know an industry which does generate tens of millions of pounds in revenue in scotland alone seems to be able to decide almost on a voluntary basis where not to pay the tax is that a fair comment or do you not do you think that's a wee bit i don't think even you can expect me to comment on that okay fair enough we'll put all the really nasty questions next week when the ministers with us are there any further points you want to make before we wind up this session anything if you haven't covered that you want to get over you and your colleagues i don't think so thank you very much for giving us the opportunity to explain where we're at at the current stage with this tax and look forward to coming back in due course no doubt you want to see as again as the legislation progresses because we will then be getting into much more detail about our operational readiness so very happy to come at any point to see here well thank you very much thank you all our witnesses for their contributions today we'll continue our evidence taking on the bill next week we'll hear from the minister for community wealth and public finance the legendary one and only tom Arthur msp as that is the final item on our agenda i'll close this meeting thank you all