Fairer taxation in first Scottish tax bill for 300 years
Historic first for Scottish Parliament.
A landmark bill which will enable the Scottish Parliament to set and collect a proportion of its own revenue for the first time in history was passed today.
The Land and Building Transactions Tax (Scotland) Bill which was introduced by Finance Secretary John Swinney will use powers from the Scotland Act 2012 to collect and manage the taxation of the purchase or leasing of land and buildings.
From April 2015, Land and Buildings Transaction Tax (LBTT) will replace the UK Government’s system of stamp duty land tax in Scotland.
The Scottish Government will implement a progressive tax structure for LBTT where the amount of tax paid is more closely related to the value of the property. This approach is in contrast to the current UK system of stamp duty land tax and has been widely praised as making the system fairer.
Commenting on the passing of the Bill, Mr Swinney said:
"Today the Scottish Parliament has passed the first tax bill in Scotland for 300 years. The Land and Building Transactions Tax Bill will replace Stamp Duty and introduce a proportionate system that is fairer to home buyers.
"The Scottish Government has set out our innovative approach to taxation that is much better aligned with the Scottish market, with Scots law and practices, and the principle of progressive taxation.
"This legislation allows the Scottish Government to set and collect taxes in a more efficient way and at less cost than the UK Government.
"We will set the tax rates nearer the time. However the system we have proposed would allow us to support first time buyers trying to get onto the housing ladder or families buying bigger homes that better suit their needs. Rather than the current distortive ‘slab’ approach, Scottish taxpayers will pay an amount more proportionate to the value of their property.
"This Government’s approach to taxation is founded on Scottish principles that have stood the test of time since the days of Adam Smith.
"Our tax system will meet the needs of a modern, twenty-first century Scotland, grounded on solid foundations and delivering sustainable economic growth.
"However the transfer of tax powers in this one area only adds to the case for the responsibility for all taxation in Scotland to rest with the Scottish Parliament. The changes we are making show that where we have the powers we are able to design a system better suited to Scotland’s interests."
Malcolm Cannon, chief executive of ESPC, said:
"I welcome the passage of the LBTT and believe this will lead towards a stronger and healthier housing market. The progressive nature of the LBTT is to be particularly welcomed, as this will help smooth out the market distortions that are produced by Stamp Duty’s ‘slab’ structure where a difference in selling price of £1 can in some cases lead to an extra tax burden in the thousands of pounds.
"LBTT promises to be a system of taxation more attuned to conditions in the Scottish housing market than Stamp Duty and this is a piece of legislation that will be welcomed by future home buyers across the country."
The Scottish Government has already outlined plans to establish Revenue Scotland, a small and efficient body which will work with Registers of Scotland to ensure the collection and administration of the tax at a lower cost than that proposed by Her Majesty’s Revenue and Customs (HMRC).
The Bill can be found at http://www.scottish.parliament.uk/parliamentarybusiness/Bills/56718.aspx
The Scottish Government’s consultation paper on Land and Buildings Transaction Tax , published on 7 June 2012, included examples based on historical (2007 and 2009) data to illustrate what could be achieved with a progressive tax system.
Under scenario 1, 70% of Scottish housing market purchases would not incur any Land and Buildings Transaction Tax.
Under scenario 2, all purchases under £325,000 would be charged less tax than is currently the case under the slab system of Stamp Duty Land Tax. This represents about 95% of the market.
The consultation paper is available at: http://www.scotland.gov.uk/Resource/0039/00394544.pdf