 Rhaol y cysylltu, yn fawr, a rwy'n frechda'n dd servant a'r Ysgrifennu Fuddiol ffath o'r Gweithdoedd Ffaeliadau Cymru yn 2023. Rwy'n gweithio ar gyfer unsiau maywr hefyd o gyfryd Cymru, ac rydyn ni'n fawr i'r cyffifffordd honig yw. Rwyf ar gael brafio, Bill Kidd, yn i gweithio'n gweithi â'r ysgrifennu, ac rydyn ni'n gweithio'r yr ysgrifennu i'r hynny ymhwyng Gwil Llywodraeth, mewn gweithiau. Yr sgolwsoedd ym ystod gywfod ym Llywyddoedd i siwr i gydolol y 3 ym 4 yn cael y prifyrd. Er replaced i gyd. Yr sgolwsoedd ym Yr Gruff以及 Rhywbeth yn y ddigwydd o'r dysgu phobosau i'r mirgrig ym 2021 yn y tyfn i'r drwrdd. Ieinn i gilydd i gael eu cymdeithas yn yr ysgolwsoedd ym 200, As witnesses this morning, Alison Stafford, who is the director general of the Scottish Exchequer, and Alison Stafford is joined by Lorraine King, who is the deputy director, tax and revenues directorate in the Scottish Government. We are also joined this morning by Jonathan Afau, who is the director general for customer strategy and tax design at HMRC, and, along with Jonathan, is Phil Batchelor, the deputy director for income tax policy in HMRC. We've got quite a number of questions that we want to put to you this morning, but before we get into those questions, could I invite first of all Alison Stafford to make a short opening statement? Thank you. Thank you very much, convener, and good morning. Scotland has had physical powers to vary tax rates and bans for non-saving non-dividends income tax from 2017-18, and relies on His Majesty's Revenue and Customs for the Administration of this partially devolved tax. I would draw to the committee's attention three particular actions that have taken forward since last year's session with the committee. On compliance, the Scottish Government continues to proactively consider Scottish-specific compliance risks with HMRC and has commissioned risk-based analysis on the scope of paper migration among the Scottish tax base. Secondly, on out-turn methodology, in response to the NAO recommendations last year, the 2020-21 out-turn calculation methodology was updated to reflect the impact of Covid-19 in HMRC's calculation of the out-turn receipts. Thirdly, on data, we've updated the service level agreement between the Scottish Government and HMRC to streamline data requests and provision. It's important as we focus on building empirical evidence to support policy development for ministers and to inform any further Scottish-specific compliance needs in future. Staying with the theme of three very briefly, three key sources for assurance for the Scottish Government on the proper collection of this tax comes from, firstly, that operation of the service level agreement and a performance framework, which is vigilantly monitored. HMRC, having a designated additional accounting officer with responsibility for Scottish income tax and all that goes with that responsibility, and that is Jonathan Athel, who is with us today to support the committee's scrutiny of their administration. Thirdly, that third-party assurance is really valuable, which comes from the national audit office providing an audit opinion, which has confirmed among other assurances that the Scottish income tax out-turn for 2020-21 has been fairly stated by HMRC and the Auditor General for Scotland being satisfied that the findings and conclusions in that report are reasonably based. All of these are vital sources of assurance, and we will continue to work with HMRC to ensure that Scottish public finances are underpinned by tax administration arrangements, which function effectively, as intended, ensuring value for money to the taxpayer. Colleagues here today are obviously very happy and look forward to answering the committee's questions. Thank you very much indeed. As you suggested, those are very much the kind of areas that we want to probe and question and get some better understanding of. Before we get to the questions, could I invite Jonathan Athel to give us his opening statement? I will try to be brief, as Alison has covered many of the issues that I was going to touch on. I would echo two or three points. Firstly, we have been administering Scottish income tax for a number of years and we have learned from that. Some of that learning that you are seeing is now being translated into performance and different ways of working. We are very much welcome at a very positive working relationship with the Scottish Government and we are also very grateful to the auditors for their work and reassured by the auditors' opinions. On that basis, however, I would say that we are certainly not complacent. I do not think that there is any room for being complacent about risks here. As HMRC customs, we see a number of risks emerging in the tax system all the time and we need to spot them, identify whether they need to be tackled and if they do need to be tackled put in place mitigations. Obviously, with a greater divergence of rates between the rates in Scotland and the rest of the UK beginning this financial year, that might be a spur for slightly different behaviour and we will need to be on top of that. Obviously, we will not have any data around that for a while yet but that is something that we are certainly mindful of and want to be on top of. I think that I will leave it there. Thank you very much indeed. As a committee, we are aware that the report prepared by both the National Audit Office and the Auditor General in Scotland used in places language-like continuing limitations and risk and some areas of concern, so we will get to those shortly. Before we get into some of that detail, I would like to take you back to one of the fundamental issues that has been raised in the audit. It came out in the evidence session that we had on 9 February with the National Audit Office and the Auditor General where they drew our attention to the conclusion that the estimated growth in Scottish income tax receipts in the financial year 2021-22 was expected to be 11.3 per cent whereas the UK equivalent income tax receipts were expected to grow by 13.2 per cent, so 11.3 versus 13.2 per cent. I wonder maybe turning to you, Alison Stafford, first of all, if you could give us an explanation why you think that the Government thinks that Scottish income tax growth has been lower than the UK as a whole in recent years. That whole area of tax performance is one that you would expect I and the Government are very, very interested in. It really is quite, as you would expect, a complex relationship between the economy and tax and will reflect a range of factors, some of them macroeconomic performance, some of them regional, some of them sectoral demographics and the composition of the tax space as well as government policy. Whilst Scotland's labour market has matched, if not exceeded, UK performance in recent years with high employment and low unemployment. Scottish income tax performance has certainly seen the impact of the change in the oil industry, Scottish receipts in the north-east of Scotland at the same time as there has been strong growth in the rest of the UK and particularly the receipts in London and the south-east are a factor. It is those particular sectoral elements. The change in the oil industry and what has happened more recently as well with some of the particular things that we have seen in inflation changes and so on has been a factor. We have set out in the medium-term financial strategy that was published last May, just to be transparent that the regional factors have been the driver of that earnings gap. That is a particular factor because of how the fiscal framework operates. It is about relative performance. There is some degree where the fiscal framework gives a little bit of cushion around that. The interesting fact is that, in relation to the tax performance and the operation of the block grant adjustment, we have seen a positive reconciliation impact built into the budget for the current financial year of 2324 based on that. I do not have the last May's medium-term financial strategy in front of me or at my fingertips. When you describe the downturn in the oil and gas industry affecting income tax take receipts in the north-east, we can broadly understand that. To what extent do you have data that absolutely backs that up? We will have data about the overall position in 2020-21. One of the things that I mentioned in my opening statement was about the changes with the service level agreement and the extent to which data is becoming a little more readily available. We have had some data flows that have been coming through in the last few months, which will give us a bit more granularity behind that. We do not have that granularity of data going back to the year that is in question and that the NAO report is based on the 2020-21. We are now getting data that is based on the pay as you earn section of the tax collection regime. As you will know from the reports from the National Audit Office, there is a combination of how the tax is categorised and how it is administered. We are now starting to get some data on the PAYE element of that, and that will be informing us much more in terms of the Scottish-specific elements. For the avoidance of any confusion about that, are you going to get or are you now getting regional-level data about Scottish income tax receipts? We are getting data that is more granular, not necessarily specifically to regions but more associated with different bands of taxpayers. That will help us, because we know that there is regional distribution to those. The other thing that you mentioned is of interest to the Parliament as a whole, but to the Public Audit Committee, no less, is the fiscal framework and how that works. It works in a particular way in which, if Scottish income tax receipts are at a certain level, compared to UK income tax receipts, there are consequential effects on the operation of the fiscal framework, which can be advantageous but can also be disadvantageous. Can you update us where the renegotiation of the fiscal framework is? One of the key important elements of the review that is planned was part of the agreement when the fiscal framework was first set up that it would go through a review. One of the key elements of that was a jointly commissioned independent report on the block grant adjustment arrangements, because, as you say, they are complex and it is not just a factor of tax take, it is also about how our block grant is adjusted as well. That block grant adjustment arrangement is also called for stakeholder input, and that is prior to the broader review of the fiscal framework. That report is written by David Beall, David Iser and David Phillips. I think that you may well know three names. That arrangement for that report has been agreed in terms of the specification of it jointly with Her Majesty's Treasury and the Scottish Government. That has been one key element to inform, and the discussions are now going to be resumed with the new Deputy First Minister and the Chief Secretary at the Treasury to take that forward, so it is now moved back into an active space. I am sure that academic analysis will be of use, but in the end this is a negotiation between two Governments, is it not? It was due to be concluded, I think, in 2020. This has been on the go for quite some time. First of all, why has there been such a delay in that negotiation, and when now do you expect those negotiations to be concluded? You are absolutely right. The first fiscal framework was a negotiation, and the review, I think, very much will be looking at where are the areas that need most attention. The Scottish Government will, obviously, and informed by no doubt, lots of discussion that has taken place in different committees in the Parliament will have a view of the particular things that are a priority, and likewise, HM Treasury. All I can say is that the discussions are now resuming. There is not a deadline that has been specifically set and agreed, and obviously we can keep Parliament informed as that develops. Okay, but again, just for the avoidance of doubt, have those discussions recommenced? You said that they are going to. Is that a future or a present description of it? So there has been basically a conversation to say that, yes, we want to now put these back on to the agenda, so those will be starting. So you've had talks about talks? You could put it like that. Okay, right. Let me move on then to another area that the committee has been particularly keen to explore. That is about the implications of much higher inflation economy. One of the consequences of that is that people's real terms and living standards are, in most cases, being cut. On the other side of that equation, it means that pay settlements have been higher and people's earnings, not in real terms but in monetary terms, have been going up, which presumably has an implication for the income tax collected. So maybe I'll turn to you, Jonathan Athau, first of all, if you could perhaps help us to understand a bit more what the impact of inflation has been on the collection of Scottish income tax. Yes, so as you say, inflation has two effects, I would sort of draw out. One, obviously, for any administrative organisation like ours, with a fixed budget, higher inflation means we are under more pressure. I would say that as HMRC, that is meaning our challenges in offering customer service when our cost base is going up, but our budget has been fixed. So that is one challenge for us as an organisation. But in terms of receipts, what you've seen is that most thresholds in the income tax system, either in the rest of the UK or in Scotland, have been fixed or actually reduced. And with higher inflation feeding through into higher nominal wage growth, that's wage growth before you take into account inflation, that brings more people into the tax system and more people into higher brackets of income tax. Over time, this is a process called fiscal drag that brings higher receipts in. So in terms of receipts, it is actually a positive higher inflation feed through into positive elements of receipts. But there are some challenges with that. Obviously for the taxpayers involved, they get brought into higher tax brackets. And also for some elements of the tax system, we are getting more people into more complex parts of the tax system. So an example of this is obviously more people who start to see their personal allowance tapered away, which begins at £100,000, and that adds a degree of complexity to their tax affairs. So you're seeing more receipts, but then also sometimes more cost for taxpayers in terms of more complexity, and also sometimes more cost for us in administering parts of the tax system that require taxpayers to do more to make certain that compliance. Okay. One of the things that we, as the Public Audit Committee of the Scottish Parliament, are interested in is whether or not there is any differential fiscal drag in Scotland compared to other parts of the UK. I don't know whether you've got any data that would help illuminate that for us. So part of that will be due to the sort of, the sort of two parts, two components to that fiscal drag, thinking one is the sort of macroeconomic picture, and Alison's already spoken to two elements of that. So if earnings growth is higher in Scotland or lower in Scotland compared to the rest of the UK, you would see either higher levels of fiscal drag or not. And obviously the other aspect, and just to pick up on the oil and gas industry, many of the jobs in the oil and gas industry are very highly paid, so it's not just the average growth, so the distribution. So if you're having more people at the top of the income distribution or fewer because of changes in the oil and gas industry, that will feed through. So that's one element. The other element is then what's happening with the personal allowance and then the income tax bans. And I don't really see huge differences in overall policies. Obviously there are more tax bans in Scotland, but the way they have changed has broadly been consistent with what's happening in the rest of the UK. So the additional rate bans now starting at 125,000 rather than 150,000, that is the same in Scotland as in the rest of the UK. So while the ban structure is different, I don't think that's adding hugely to the fiscal drag. Probably the key, key determine is the fact that most bans and rates are frozen in cash terms, and also then what's happening to the underlying economy, where again you will see a difference between Scotland and the rest of the UK for the reasons Alison set out. Thanks. I mean again, just to be clear about it, I mean do you have data to back up that analysis and to help you reach that conclusion that there doesn't appear to be much of a differential impact in Scotland compared to the rest of the UK? We will certainly see that in outturn. Part of the challenge with the tax system, and it's something Alison alluded to, is that for PAYE we get data on a regular basis, and actually that data is reported monthly now, and there's various cuts of that data is now available. Some of that is now being provided to the Scottish Government, but the challenge is with self-assessment income tax. We do not get people's self-assessment tax returns until nine or 10 months after the year in question. So while inflation is high now, we won't get the file with the self-assessment tax returns for 2022-23 until January 24. So some of that data is always lagged, and particularly when we're talking about higher income groups, self-assessment is very important for those groups. We will have some data for PAYE, but the data for self-assessment will inevitably be lagged. Once that's there, you can then do that sort of analysis. Just one final question in this area. Do you expect there to be a higher level of income tax per head in Scotland as a result of this process of fiscal drag wages going up inflation rising and so on? Yes, depending on whether the denominator is everyone working in Scotland or everyone with an income in Scotland, you would expect to see tax per capita, income tax per capita grow over time because of these elements of fiscal drag. The only caveat to that is what happens to employment at the moment. Employment is staying relatively robust, but if there are changes in employment, that might change it. Other things equal, fiscal drag will increase the tax take per capita or per worker. We are a bit pressed for time, so I'm going to move on now to another area that's been of special interest to the committee, and Craig Hoy is going to ask about that. Obviously, in recent years, the main concern in Scotland has been the different thresholds in relation to tax, but now we're getting different rates potentially impacting behavioural patterns. I just wanted to put very quickly to you just four quick scenarios just to make sure that my mind is correct and perhaps to assist anybody who's watching. Assuming if somebody's living in Berwick upon Tweed but working in Edinburgh and commuting into Scotland to do their job, they wouldn't require an S tax code, is that correct? As long as they are properly resident in Berwick, that would be the case. And if somebody was living in Berwick and working remotely for a Scottish company again, it would be entirely applicable for them to have a UK tax code. Yes, it is where they are resident rather than where they are working that determines. Broadly speaking, there are some exceptions, but broadly speaking for most people it is residents. Obviously, there are special rules, for example, for MPs representing Scotland, Scottish constituencies in Westminster, for example. Excluding those special cases, it is mainly based on residents. Fine, and if I was a chief executive of a Scottish bank but lived in London and commuted up from London in a state of no hotel five days a week, even though I was spending more time in Scotland than England, I would still be resident in England. I would need to look at the very detailed rules about what determines residents. We have got specific rules for specific circumstances, so there might well be cases where people, because over the amount of time they are spending in Scotland, could be deemed to be resident in England. So it's not necessarily just linked to where your primary residence is in that respect? Again, we look at residents in the round, essentially, and there are a number of tests that we would look at around that. And there are obviously detailed rules given people's different circumstances. Obviously, you've got people, for example, who spend a lot of time offshore, for example. We need to have particular rules to case for a wide range of purposes, but you could have somebody who, as you say, lives in the rest of the UK but spends a large proportion of their time in Scotland who could be considered resident outside Scotland. Okay, fine. The reason I haven't put the scenarios to this is just post-covid, obviously, behavioural patterns and working patterns have changed quite dramatically. You no longer have to live near to your work and remote working is far more common to what extent are you or the Governments looking at the impact of remote working in relation to the operation of the tax system? Obviously, remote working has a number of different aspects to affecting income tax. So it's much wider than simply where you live. There are a number of rules around benefits and kind and other such things that are very important. So there are a number of aspects to which this new way of working is going to affect tax. One of the things we are doing is we are building a longitudinal data set because we are very keen to make certain that we understand what patterns, how behaviour changes over time. And as you said, particularly with changing rates, we want to understand longitudinal studies, so understanding who's currently registered as a Scottish taxpayer and how that changes over time. So that will allow us to monitor what happens with the number of people who are Scottish taxpayers and what happens to them. So we will be able to monitor those sorts of patterns. We will also see it, I think, through more generally patterns in some of the postcode matching we already do. So we'll be looking at that. Some of this, I think, and I was reflecting on this earlier, will also depend on how employers understand the operation of the Scottish income tax system. If they are better understanding that, they'll be better able to keep records up to date. So there are a number of ways we'll be able to monitor this, but I'm hoping the longitudinal data in particular will allow us to understand what happens over time. And what are those emerging trends and what is the emerging evidence telling you about behavioural patterns in Scotland? Is it too early to capture anything, or can we see, for example, that people aren't taking promotion or aren't doing the extra shift because the rate of tax perhaps is discouraging them? So at the moment we're not seeing, I think, anything particularly marked in terms of behaviour in Scotland that we would not expect to see elsewhere in the UK. So the Scottish Fiscal Commission obviously does the forecasts and also costs to use the jargon, how much additional revenue tax rates will have been brought in. They make judgments about how people respond to higher tax rates, whether that's changing their tax planning behaviour or changing, for example, their economic activity, not taking a promotion, those sorts of things. So that will already be factored into that analysis. It's something we sort of look at more generally across the whole of the UK tax system when there are changes. We make allowances for behavioural change, and as I said, that behavioural change is not always just economic change, but can be changes in people's tax planning affairs. But again, that will all be able to be monitored. You'll be able to evaluate that by looking at changing patterns of receipts. And that has been some work already been done in connection, I think, with the Fraser van der Institute to look at some of these behavioural responses. Would it be fair to see that the greater the divergence, the greater risk is that people's behavioural patterns do start to change? Yes, as I said in my opening remarks, obviously, with the financial year just beginning, the differential in the additional rate has gone from 1 per cent to 2 per cent. And obviously, for very highly remunerated individuals, that could amount to a significant amount of additional tax. And one of the things we need to be mindful of is are we seeing behavioural change? Are we seeing, in particular, what we would be interested in, in particular, is non-compliance? People trying to present themselves as being resident outside Scotland when they are actually resident in Scotland, that would be a key concern for us. Or whether it drives other forms of non-compliance. And as I said, as an organisation, we experience lots of unfortunate creativity in how people try and circumvent their tax obligations, and we need to be on top of that. Obviously, the discussion around the impact and whether it is sensible to have very divergent tax rates is perfectly a matter for ministers. But I don't know if Alison, if you perhaps want to comment upon what work is being undertaken. Because presumably it could be that we only find out once, about the problem once it's too late, that too many upper-rate taxpayers are moved or too many individuals have incorporated in there for all of the tax receipts to go to the UK Government rather than the Scottish Government. So what work is presently being undertaken to make sure that we are alert to the fact that we don't come to this issue once it's too late and it has a material impact on tax receipts in Scotland? One of the particular key things is actually still drawing on evidence that was done looking at when Scotland introduced the five tax bans. That was a major change, a major policy shift to a more progressive tax regime here in Scotland. And as Jonathan was mentioning, that involved academics from the Fraser of Allander but other institutes as well. It was a collaboration across HMLC and the Scottish Government. And that policy evaluation actually was a published policy evaluation so that's available for all to see. And interesting enough as well, when we look at the even more recently the use of the independent expert panel which was commissioned in November last year, that was to reflect on what had been set out in the emergency budget and the tax changes in the UK Government around that time. That the empirical studies suggest that tax-induced cross-border migration is small in magnitude. And that is certainly the case that was coming through in the 2018-19 income tax policy change, found that there was no evidence of significant behavioural change from that perspective. I mean, as Jonathan says, there are people who are at the higher end of the earnings spectrum can afford to pay for advice and can legitimately change their tax affairs. Those behavioural factors are taken into account. They're taken into account when policies are being shaped with the estimates that we have but equally in the information that we all see Government and Parliament at the same time from the Scottish Fiscal Commission about those behavioural impacts. So as I say, the most dramatic change in the tax shape and landscape in Scotland was in 2018-19 and that's given us then a sort of further basis to work through. And where that was helpful in terms of the collaboration with HMLC and ourselves is that it was against a fairly static environment in the rest of the UK. So that gave us some of the better insights at that particular point in time. As Jonathan's explained, the actual impacts compared with the SFC's assessment of those impacts will only really be tested by the time we actually get those outputs. But... So there is the risk that there's a sort of lag here and that actually public policy is continuing to go in the more progressive higher tax direction. But actually the impact of it won't actually be felt until two or three years after any fiscal changes taking place. All I would say is that Jonathan may wish to comment as well from the point of view of the analysis work that you do south of the border as well. But I mean that's very much the sort of area though that the Scottish Fiscal Commission look at. There is sort of data feeds that are around the surveys of personal income. They are on a more regular basis. And there is a particular feed of data that can go to the Scottish Fiscal Commission. It's just PUT and I'm now trying to remember what all the initials stand for but someone will tell me from HMRC. But so there are other sources of data that the Scottish Fiscal Commission draw on. So that there's a combination of looking at history, looking at those more recent survey data feeds and also then obviously we'll be doing that post evaluation as well. And just in terms of this the overall Scottish tax base there is a heavy reliance on a very small number of upper rate taxpayers and it wouldn't take too many at the high end to quite significantly distort the overall tax take. To what extent do you think that this should be on ministers radar both in terms of behavioural change but also the impact of both inward and outward migration of fewer people coming here and perhaps more higher rate taxpayers leaving if that differential becomes too significant? Are you picking up that ministers are alert to the potential double risks that could have a high impact on particularly the upper rate tax takings government? So as I say in terms of that sort of geographical shift both in terms of what was a more recent commentary from the experts last November and also that what we've seen that geographical shift of place to live and as we know people base their decisions on where to live and work on a range of factors not just tax. So at this with the data that we have at the moment that's not something that is borne out by these other independent assessments but like you say there's a huge emphasis if you look at the national strategy on economic transformation there is an emphasis within that about actually recognising the role of entrepreneurs and how actually and we've seen very recently over these last few weeks some real successes of inward investment into Scotland the inward investment statistics that are produced separately by EY you know we're showing that that is still a vibrant space so I think there are other activities other things that are happening in Scotland that's not that's a more holistic approach and not just looking at tax and all of these things are obviously important to ministers as they shape how we can in effect raise money in a progressive manner to support the valuable investment in public services across Scotland. Okay, thank you very much. Well director general you're in danger there of straying into an area of policy which is of great interest to me which is the extent to which we have to rely on foreign direct investment versus the extent to which we are boosting our indigenous business space but that's not for this morning's conversation Have I voiced that in another bit? Yeah, absolutely, any time. Bill Kidd has got some questions to put to you around transparency. Bill? Yes, thanks very much, convener. Now, I'll be injecting a wee bit of excitement into the morning and having a couple of questions about the Scottish Income Tax Administration because that's always something to get you on your toes. So the committee is already familiar with the service level agreement between the Scottish Government and HMRC and that's publicly available and reviewed annually and changed as necessary. So I'm wondering whether the terms of reference of the board or details of meetings and minutes of the board are publicly available. At least that was wondered and asked and the answer that was given to us was that there were no details of the Income Tax Board on minutes in the public domain and can we ask in terms of this why is there no publicly available information on the Scottish Income Tax Board and would it be possible to publish details around agenda items and minutes from the Scottish Income Tax Board's meetings? So Jonathan, I've just discussed that I will respond to your question and obviously Jonathan can come in as well if helpful. So just to say and update the committee today, both HMRC and the Scottish Government are content to publish the minutes from future board meetings to help as you say the transparency of the governance arrangements of Scottish Income Tax. So we'll start publishing from the current tax year 2023-24. I'm sure you'll appreciate the appropriate governance that minutes will obviously go to the subsequent meeting for approval and agreement. I'm sure it's something that you adopt as good practice within the committee here. So it will be during this year that those minutes will be made available and obviously as part of that it will be clear then in terms of attendance who the members and what have you are of the board. Well that's perfectly reasonable just so that that's within a year or this tax year anyway. During this tax year, yes. In the interim period would it be possible for the committee, this committee, to receive a summary of issues covered by the board meetings by correspondence such as there is such an arrangement and the Finance and Public Administration Committee receive a summary letter from the Cabinet Secretary for Finance when UK finance ministers quadrilateral meetings occur could that sort of correspondence with this committee be introduced to cover the period between now and when the SIRM securitiw to take place? Just this sort of interim of giving you some insight as to what the we've had there's been one meeting so far this year so it meets quarterly. Right, all right, okay. Therefore the next meeting will be in July and therefore you would get the minutes from that first meeting after that July board. As soon as that, right? Yeah, so if that will meet your needs then we can work to that sort of timetable. Very, very admirable transparency. Thank you very much. I don't know if Jonathan Attow is innocent here. I'm very happy to support that. We want to be as transparent as we can be. Sometimes we do talk about sort of sensitive operational compliance issues and there might need to be some discretion exercised around around that but in general we wish to be as open and transparent as we can be. Right. Well, I assume to have been successful this morning. Thank you very much. I'm not on my behalf. I knew you did it. But thank you very much for that. Thank you. Thank you. Thank you. And but just for completeness it would be helpful if you could perhaps notify the committee when they are going to be published on the website just so we've got a warning of it. And just again that it will be published in two locations given the it's a partially devolved tax and the administration we rely on HMLC so it will be both on the Scottish Parliament website and while Scottish Government website and the UK Government website as well so we'll make sure that happens simultaneously to respect both houses. Thank you. And one of the questions that we've had previously just around the Scottish income tax bodies we couldn't find anywhere published its terms of reference. Would you be able to supply those to us as well? We can do that as part of the same same publication. Yeah. Or just to send it to the committee. Yeah, or before that if possible. Yeah, no. So we've got that sense of what the object of the board is before we get the first set of minutes that we're going to be able to view. Yeah, no, that's it. We'll take that as an action. Thank you. Thank you very much. I'm now going to move things on and invite Willie Coffey to put some questions to you. Thanks very much, convener. I wonder if I could just ask a couple of questions on issues about data gathering, data integrity, methodology, and so on and so forth. And I think you touched on it at the beginning, Alison, and your remarks to last both. Are you broadly satisfied that how we do what we do is providing the accuracy that we expect and that we need? We had a couple of comments at a previous session from Darren Stewart in the national audit office suggesting that we might want to look at more and more frequent third party data gathering exercises. And I think you may have touched on it earlier on, Alison, about the methodologies that we use. And the controller, as well, said that he had identified limitations in the methodologies so that sampling data being UK-wide and then a proportion of that being taken as Scottish data didn't really accurately reflect the circumstances in Scotland with the tax variations and so on. So could you just talk a little bit about how he satisfies your third party data and how accurate it is and whether there's scope to improve it? Okay, thank you very much. I'm actually going to ask Lorraine to respond because the very specific operational elements as to actually what the other processes that HMRC go through to actually make sure that we can have a high level of confidence in the taxpayer base being identified. You know, that's all rooted in some particular data exercises. So, all right. Thanks, Alison. The data class exercise currently takes place every two years following agreement between HMRC and the Scottish Government. This was previously judged to be appropriate, striking the right balance between resource and the additional assurance of identification that takes place. The last data class took place in 2021 and showed that proportion of correctly identified Scottish taxpayers was around 98 to 99 per cent when considering records that were active in self-assessment or PEYE systems. That doesn't mean that the 1 to 2 per cent of cases were found to be wrong. The exercise compares a snapshot in time from HMRC data against a multitude of the snapshots from third-party data sources. The 1 to 2 per cent are uncroborated. Rather than incorrect and in many cases, they are due to cister in active records. The next data class will take place this year. Phil from HMRC might be able to find more information on when exactly it will take place, but we would expect to have the results from that within the next couple of months. Once we have those results, we will be able to take an assessment of whether having the data class undertaken on an annual basis might more be appropriate now, given the forthcoming divergence in the income tax systems. We currently undertake our data class at the same time as Welsh Government, so if we were to move to an annual basis, there would be some increased cost for the Scottish Government for us to bear. That would not necessarily be prohibitive, but that would be something to bear in mind. I would need to consider whether it would offer value for money for doing that. Obviously, in some areas, particularly around when we use UK-wide estimates for Scotland, wherever possible, we try to avoid doing that. For self-assessment debt, I think that we look at Scottish specific data however, there are sometimes limitations that certain data for Scottish taxpayers is not available or not available in a timely way. Those are areas that we constantly look at. Those are things that will come to the Scottish Income Tax Board and are scrutinised. So simply because what we are doing at the moment does not mean that it will always be that way. But again, we just need to work out what is the most sensible areas to look at next. On the third party data, that is something I should say, third party data is something more generally, HMRC is interested in. It allows us to double check much more than simply addresses but also income and other aspects. So third party data is something that will be of growing importance to us at a most strategic level. And I completely agree with Lorraine. We will need to keep under review how often we do the current sort of matching exercise for Scotland and whether there is a grounds for increasing the frequency of that. That obviously has a cost attached to it so you want to make certain you are being proportionate to the risk that's being presented. Is it ever possible to get better performance than those 98, 99 per cent figures that you mentioned there? I mean, you're ultimately trying to get forecasts and out turn to be as close as possible can be. And maybe that's an impossible task but to use Scottish data only to try to achieve that accuracy is that something that you would consider doing or do you still think it's appropriate to draw in UK data to give us that picture? So I think we would look at it on a case by case basis is the data good enough and part of the reason sometimes we have discrepancies for this 98 or 99 per cent of matching and the others is sometimes because we end up with people not knowing for example their national insurance number and they're given a temporary number so that can't be matched very easily in our records. So there is always going to be a degree of churn in the labour market people moving in and out of jobs which will create some of this noise people moving between Scotland and the rest of the UK in either direction and lags in that. So I think there will always be a residual of cases that will be very difficult for us to match using our existing data but hopefully over time we will be able to sort of identify the sources of those things and tackle them. As I sort of alluded to in one of my earlier comments I think there is hopefully some over time particularly employers who we rely on for example for address data will realise that having accurate address data for their employees is more important because if they don't one of Phil's colleagues will phone them up and say why you're not applying an S code in this particular case. So I would also hope there will be some behavioural change over time as people get employers understand the importance of good address data. So I think there are lots of reasons for thinking the situation might improve but there will always be that at the margins people who don't have the right don't have their national insurance number people who are moving and and take a little time to update their addresses. Okay thank you very much for that. I hope I can come back in on the S code issue that I think my colleague might raise in a moment. Thank you. Thank you. Can I just raise something with you that I think we raised with you last year and and that is this. It's pointed out in the report from the national audit office in paragraph 2.32. It says the tax gap is the difference between the amount of tax that should be paid and what is actually paid. HMRC does not currently produce a Scotland specific tax gap. Why don't we know what the tax gap is Alison Stafford? Okay so the tax gap and obviously Jonathan can describe a lot more what goes into calculating a tax gap overall for the UK but it is it's broad it will cover all aspects of taxation and we're obviously just looking at Scottish income tax so it will go on to cover other aspects of employment type tax like national insurance and broader taxes as well across that piece. Is it right coming in to say a little bit about so as you say the tax gap is is a sort of level of non-compliance. We are one of the few jurisdictions that estimates a tax gap on an annual basis for pretty much the whole of the tax tax system. The challenge with providing more granularity in terms of Scotland or any other aspect of geography is the way in which we undertake elements of that tax gap. So an example of something example of what we do is something called a random inquiry. So we would take a group of maybe a thousand taxpayers at random and we would investigate their tax affairs and say we find 90% of them are fully fully compliant we would assume that 90% of the entire population is fully fully compliant. So that's the process you go through. What we do at the moment is we take that that thousand as representative of the UK as a whole. If we were to try and do something for Scotland we would have to have a separate say thousand taxpayers in Scotland that would be much more intensive for us to do be expensive in terms of the number of tax inspectors we would need to do it and also it would be diverting from other work. So in theory it is possible to do in practice it is very challenging to do it and would be very costly. What we can do is look at other sources of data so the work we do with through the Scottish Income Tax Board in other areas to look at what are the risks? Are there particular risks in Scotland? Are there particular groups of taxpayers who we think are more likely to be non-compliant in Scotland? We can look at those sorts of things. So we will address the underlying issue of the risk but we do not think it is proportionate at the moment to do a separate tax gap calculation for Scotland is better to look at the underlying data and use that to action the work we do to make certain we are tackling non-compliance. If the fee attached to the service level agreement or other parts of the memorandum of understanding were revised it is something you could do if you had the resources to do it. It is. I would just stress that it is not a simple undertaking. So for example we have recently recruited a large number of extra compliance officers tax inspectors I will use as a term of that but it takes many years for them to be trained up. To be a tax inspector obviously sometimes you might be taking a case to criminal prosecution so you need to be fully trained in all aspects of many aspects of law enforcement. So it is a really quite it is not something where we can go and easily recruit and bring in extra people to do this. So again if you were doing it as I said in theory it could be done however it would be significant undertaking with potentially significant costs. And just one aspect of that cost just to emphasise is obviously if we are going for a random selection of tax pay as that random thousand the tax inspectors working that are not working the highest risk cases. So there is also we also risk not collecting all the receipts we need because we are doing those random inquiries. So it is something we do it because it is very important for us to do for a UK wide basis because it informs a lot of our risking but at the moment we do not see the case for that significant investment. Of course it could be done if there was the time, effort and money put it put into it but at the moment it is not something we see would be give sufficient benefit. But to Alison Stafford do you not see a benefit would there not be a benefit to the Scottish Government in having that data? I mean we're talking what is it? 11, 12 billion pounds worth of revenue collection as a fairly basic I mean we are the public audit committee but even on a basic kind of housekeeping level would it not be sensible to know the difference between what should be paid and what is actually paid in Scottish income tax? So the particular areas that we look at are jointly with HMLC about the risk assessment around either non-compliance or non-payment and that is done and that is refreshed on an annual basis and the risk around this particular area is deemed as one that is low. The area though that has real merit and where we are making an investment to use that phrase is on this longitudinal data set so Jonathan's already in response to Mr Hoy said a little bit more about that but that will really enable us to analyse and understand those movements across the UK and also we have requested additional risk-based analysis on the behaviours that may be very specific to Scotland so we're targeting on the areas that are the ones that offer this committee does ask us about and the things that actually are likely to be more of a risk that needs to be either addressed through the work of HMLC obviously we've heard already in response to some of the other questions about the sort of small relative margins that we are then looking at but that extra work including looking at taxpayers that own more than one property across the UK so to see whether there is any risk of some form of paper migration to avoid paying Scottish Income Tax so we're targeting our investment in the areas that the risk assessments are informing and this particular one that you're asking about is not seen as something that has that same risk exposure you'd expect us to be making risk-based judgments and investments in what we're doing in continuing to get the robustness and build on the work that has happened from HMLC and clearly as we've seen from the national audit office they have placed high assurance on the processes and systems on HMLC I have to take some comfort from that and I do and equally the Auditor General for Scotland has placed reliance on the systems and processes that national audit office have gone through to make their conclusions Yeah and I accept that but it's the national audit office report I'm reading out the quotation from which points out I mean so it's obviously an issue it may be a low priority it may be a low risk in the estimations that you've made but nonetheless it's something which the national audit office has drawn to our attention has been something that's worth commented on and I think for us it's a matter of we understand that there are priorities and risks to be assessed but it just seems to be a pretty fundamental piece of data that would be useful for the Scottish Government to have and for the Scottish Parliament indeed which sets the rates of income tax to have to understand what the tax gap is but I'm going to move on now and invite the deputy convener Sharon Dowie to put some questions to you thank you good morning can I ask a quick question first following on from Clee Coys questioning do you have figures just now that show how many people are actually working for a Scottish-based company but live in England and vice versa how many people work for an English-based company but live in Scotland and it's just to do a hybrid working and also are there any figures to show because if you're working hybridly you could work in any country so are there any figures to show how many people probably pre-pandemic would have worked in the UK but are now working living abroad but it's still working in the UK so I'm this is an area so I'll take you back to a bit so we know where people live we hope we know where people live and that's why we do all the the exercises we've been we've been talking about often we don't know the place of work we will often know that where the company head office is because that will be where the payrollers administered from but often not necessarily the place of work now this arose as a particular issue during the pandemic particularly when there were varying geographical restrictions ministers asked us to look at whether there are ways in which we could target for example the furlough scheme in particular particular employers at the time said because of those limitations we didn't think that would be robust we would only be getting the head office and so for some very large employers you know some of the large supermarkets it would all be where their head office is so not particularly reliable so it is an area we've looked at as whether we can collect that data in future so if we were needing in some future national emergency to put in place some sort of financial support we would be able able to do so but Phil you were closer to that so you might just want to speak a little bit about some of those challenges yeah certainly so I think the probably the first point to to make is that the liability to Scottish income tax as Jonathan was saying really is based on your your residence as opposed to your to your place of work so we wouldn't expect we wouldn't expect to see differences in the level of Scottish income tax collected as a result in these changes that might be affecting people's place of work so definitely important to recognise that that residence is the factor that determines your liability to to Scottish income tax in terms of that employer data as Jonathan was saying the way that we're organised is based around PEYE schemes and particularly for larger employers that may operate cross border that payroll that PEYE scheme won't include the granularity of data that would specify whether they're working north or south of the border or indeed whether their duties are currently taking them overseas so we don't have figures at the moment so we wouldn't have figures at the moment but it is an area where we are thinking of whether we can collect that data whether employers actually hold it and obviously for some employee for some employees you can imagine if you are you know a somebody who repairs lifts kind of where you work is actually quite an interesting idea you may be travelling around quite a lot anyway so some of this we want to ask employers is it meaningful to collect that data obviously for many employees it is um if you are working at supermarket in in in Edinburgh we you know that's pretty straightforward but as I said there will always be a category of employees for which that is difficult so we have asked employers whether they would be able to collect that data and provide it to us to allow us in future to be more nimble in responding to events such as a pandemic or any other time when we would need to put in place additional financial support so it's not available at the moment but it's something we are pursuing for the future in which case you would be able to understand exactly those sort of of yeah I think it was more for the behaviour of impact so obviously the first minister spoken about progressive tax measures and it wants to go further so if there's further diversities it was basically to see if more people were actually going to cross the border so we would we would as I said this longitudinal data will look at residents so we'll be able to understand how patterns of residents might change over time but that dynamic between at the moment we wouldn't have that data right and do you have anything to show any of you that would like now live abroad but what would you do? I'll have to to take away that and have a look at that as to kind of how well that's what well that's that's estimated there might well be some survey data or something else that allows us to understand I understand that but let me take that one away as an action sorry how would how would tax work with that where would they be taxed? so again again residents is the primary way in which so tax would be paid in the country of 11 yes indeed yes and that's both internationally and within the UK that would be the basis the broad basis is one of residents as I said with some minor minor special rules for certain groups yeah okay thanks okay so moving on to identifying Scottish taxpayers although it's only a small percentage of cases there are still employers who issue incorrect tax codes and the committee's been informed that this is usually the result of a software error because you tell us more about what the software error is and who the software belongs to and what if anything's been done at the moment to try and prevent it happening in the first place so let me let me start and then I'll hand over to Phil to talk about this so administering the PAY system is the responsibility of employers we provide obviously guidance and rules and codes for PAY schemes to operate so primarily it is with those providers now the challenge is that there are a huge range of software available for employers to run PAY schemes and we see this when we make changes to income tax or national insurance more generally so there are some providers who it's very straightforward it's you know the most cutting edge technology it's cloud based so they can just change change a a parameter in a programme and everything flows through but then there are sort of people who are still using more traditional PAY role software that might be quite old or or or and might struggle sometimes to deal with changes or to deal with particular particular circumstances but Phil did you want to say a little bit more? Yeah have to say say this is certainly an area where we've seen an improvement of performance so 1920 about four per cent of employments might have an S code applied incorrectly that's down to something in the region of one per cent now that's still higher and that we'd like and we continue to work with employers to to improve that as Johnston said it can be a range of situations so particularly if you've got a large employer even a relatively sort of minor glitch in applying the codes that we've put out can affect a large number of of employees essentially as Johnston was saying if they've recently put in a new complex payroll system and there's a glitch there to do with how it's applying the codes that we tell them to to operate and then that can flow through into you know quite a large number of employments in year the sort of two things to emphasise is that firstly in every case we're putting these right so we can tell from the real-time information reports that they send back to us we can identify the ones who've failed to apply the correct S code and certainly subsequently that will be put right so by the time we get to an out turn figure for the for the Scottish Government those issues will all be corrected however there is an impact on the employee in the meantime he's been paying the wrong amount of tax in year and that's why we do have quite an intensive programme of employer education and to try to get them to to improve how that's going what we're observing is that after we've gone out and you know made contacts with an employer it's relatively seldom that we see that happen again so those education activities are successful and as I say we do have quite a major reduction in the number of S codes that are being applied incorrectly How much does it cost the GMRC chasing employers a bit incorrect tax codes? Do you have a cost for that? I'd date I think that's part of the national activity yeah yeah yeah so again obviously we're we're very transparent about the costs of operating the Scottish income tax system but obviously there's a huge amount of work we do normally to make certain employers a compliant I mean in general PAYE is a very is a very good system in terms of low levels of non non non non compliance the tax gap there is normally around 1% so normally it's very very very low but there's a whole set of activities we have to do with the employers to make certain they're operating the income tax and national insurance system and sometimes student loan payments as well so there is a whole set of activity we do which we call employer compliance which goes out and a lot of that is about education and supporting people to get things things right many of you know very few of the errors or problems we find are deliberate they often just glitches in the system or people not fully understanding how they should be operating the system so it's various software packages depending on what package the company uses so is there any kind of characteristics of the employers that are making the errors like is it big employer small employers we see just a whole range of activity as I said sometimes we know people who are operating older IT systems it can be more difficult so that is often a particular challenge it could be fast growing businesses that are scaling up and therefore they had a payroll system designed or a payroll department designed for a small organisation so there are a number of factors beyond that you would expect so we're not seeing any particular areas or particular areas of concern around that it's just an on-going challenge for us in terms of operating the tax system when there are hundreds if not thousands of separate software products out there that people are operating to get their tax system right and it has consequences for us in terms of when we want to make changes to the tax system we have to give people a lot of notice because if you're working on an old system changing those tax systems takes some time so there are some real challenges here and it will, for example, if the Scottish Government wished to make changes to tax rates or thresholds we would then make certain we communicate that as early as possible the earlier we can communicate it the less chance there are of errors so it's a number of factors that drive it nothing I would think suggests there's particular concerns in particular areas or particular practices so you go back and inform employers if there's any issues is there any evidence of repeat offenders and if there is any repeat offenders then it's done deliberately is there any action taken? So if people are not operating PAY correctly we can take action but it is very rare we find that there are some people who use avoidance schemes where we do see people not operating PAY correctly or they're operating PAY correctly but only on a portion of people's income so there are some issues there but in general as I said PAY we see work very efficiently I don't know Phil if you wanted to add any colour to that Only that we see no evidence of recidivism as it were repeat offenders in the application of S codes amongst employers we concentrate on the large ones not because there are any sort of less compliant per se but just because that has an effect on a larger number of employments and a larger number of individuals so that's if we're prioritising our attention so that's where we prioritise them Okay thanks and just one last question on addresses who is it that's responsible for notifying HMRC if somebody moves house or changes address? So it depends on which income tax regime you're in so for PAY we rely primarily on employers for that and certainly for people if you are recruiting somebody new to your company we expect you to have an address for that person the challenge comes I think when people move and don't always tell their employers or take some time to tell their employers for self-assessment we primarily rely on the individual themselves because that's how we communicate with them or traditionally been how we've communicated with people through posts so it varies between the tax regime but employers are very important in this process and as I said I think through the operation of Scottish income tax I think employers have become more aware of the importance of address data in getting their employees tax right so I think there's been a bit of a learning curve hopeful there's been a bit of a learning curve and the employers are now more sensitive to to this than they have been in the past Relying in employees to inform them though there's nothing in place for like estate agents or letting agents or anything to notify anyone of changes of address or anyone buying properties no we don't use that again we are looking at kind of how we can use third party data more generally and as we said sometimes the clashing exercise that we do does yield inconsistencies and then we try and contact contact people to try and get those right so but it's not an automatic process quite in that way the primary way in which we get addresses is through employers or the individuals themselves I think that Willie Coffey wanted to come back in on this area too so Willie thanks can I just probe a little further about the numbers that are not properly do not properly have an S code attached it's something like 4 to 1,000 it was stated in March 22 in March 21 it was 39,000 so the percentage might go down a bit but the actual numbers are going up where the S codes are annoyingly not being applied correctly firstly is it an offence for an employer not to apply the S code correctly when they know they should do so I think most of the time we wouldn't see it as an offence in terms of not operating the tax code correctly um as I said our aim is to primarily it's it's a question of education and at the end of the year even if an employer had not operated the tax code correctly we will correct it to make certain it is right however if we were to see an employer serially not meeting their obligations that would be a concern for us and there are potential penalties that we could apply but as Phil has said we don't see that it's more a challenge of people not being aware or having slightly clunky IT systems that don't fully operate but in general our approach as I said particularly with employers where we know there's very little deliberate non-compliance our approach is based around education and support rather than penalties or even the threat of prosecution okay it says in the report that it's a small number of employers that are involved here but it's 41,000 people so there must be a large number of people working for a single employer who are not paying their proper S code, tax code is that fair to say? Yeah exactly so as Phil has said it can be sometimes a large employer has a problem and because they're a large employer it will affect a large number of people and often as I said because it's not necessarily the same employers every year it's simply a churn of a problem arises something is not perhaps handled properly in their IT system and they need to correct it so some of this I think it's going to be quite interesting as to how much of that we will get better over time as employers learn and how much of it is just natural because you make a change and the IT system doesn't quite respond in the way you expect so I think there's just a bit of a we will learn a bit more as we go through this as I said hopefully we're seeing encouraging signs of things going in the right direction but it remains a challenge and just to go back the primary I think problem here is that the employee is not playing the correct tax during the year and that either means they end up with a potentially a little bit of a windfall at the end of the year or having to pay a bit more than they expect so it doesn't affect that the receipts being collected but it does have an impact on that employee so that's the primary primary way in which that incorrect application of the S codes would affect the operation of the tax system and the employers that are involved here is it publicly available to know who they are or is it confidential that we will never know who they are so the rules under which we operate give us very little discretion to name any taxpayer or any organisation involved so we wouldn't be able to disclose that information obviously we do sometimes have powers to disclose but that's only for the most egregious behaviour and as I said in this scenario we are seeing this as more inadvertent error or problems with our systems rather than anything to liberate so I think we would see it as disproportionate to try and name people involved in this so that employers can not apply the correct tax code to the employees and remain anonymous if they were doing this systematically and repeatedly we would look to penalties or prosecution but what we are seeing at the moment is administrative problems challenges with administration and we think that would that's a very different sort of behaviour to the harder edge in HMRC we see a wide range of behaviours from simple error things going wrong right through to hard edged organised criminal gangs you know we are talking all the things are on the S code are all in that that end of the spectrum of error so that's that's how we treat this particular issue last query is if there is a value at all attached to the 41,000 who are not paying the proper Scottish tax code is there a value an overall value of the loss? so as I said it I don't know if we've got that that number as I said it wouldn't be a loss to the and often what we're doing is it might only be one month or two months that it might apply to so but again I think I'd have to we'd have to look as to whether we've got the data as to how I mean I think what you might be interested in is of that 41,000 actually if if 40,000 is only one month that's out then that's different so let's go away and see if we can find some data around the 41,000 or whatever the number is to to give you a bit more bit more insight many thanks for that thank you I think Craig how you want you to come in with a very quick question on there I'm sure what it's on thank you you can get it it was just if you don't mind me just crunching and traversing I just came back to the issue of behavioural patterns just there were some figures I was looking for earlier but I couldn't look at but I've located them now there was a report that the HMRC produced that said that for a 1% reduction in the proportion of income that operate taxpayers earning 150,000 pounds routine so 1% reduction in their income that leads to a reduction of between 0.52% and 0.7% in the level of income they declare now it was quite clear that that report I think said that wasn't down to non-compliance that was down to behavioural change on the basis of that don't we already have some quite empirical evidence that suggests that those increases will lead to behavioural change and who should be advising ministers in relation to that is HMRC is it the Scottish Exchequer or should it be the Scottish Fiscal Commission because those figures seem very clear to me so those numbers were reflected in the Scottish Fiscal Commission's estimate of how much additional income would be brought in and so they apply that judgment on that as you said there's quite a lot of research now on on those parameters and to risk of going to jog and that's called a taxable income elasticity or a tie so there is a considerable evidence out there and the Scottish Fiscal Commission took a judgment on that but normally what happens is you know as operators of the the tax system we do research ourselves we allow others to do research it's then really for policy makers to determine how they take into account those judgments around those particular parameters so but you know as I said our job is to make sure that that information is available it's then for policy makers to decide how they wish to weigh up the different factors that they would take into account into setting the setting policy but in terms of I know you've got tax design in your taxes in terms of tax design that's a pretty clear piece of the jigsaw that you were going into saying the tax system indeed and if I go back to a sort of UK wide policy announcement this was a key that that particular set that particular parameter was a key issue in deciding about the future of the 50 percent tax rate that was that went that was introduced and then was reduced to 45 percent so all of those sort of decisions take into account those sort of behavioural responses and then it's for ministers to weigh up the varying competing issues that they wish to take account of in terms of and that's a matter for Scottish Government ministers to take into account thanks thanks for the clarification thank you thank you my final question is to Alison Stafford and that is to ask if you could tell us what the Scottish Government's position is on the deployment of private debt collection agencies so in relation to Scottish income tax the administration and the collection of that is actually all part of what HMRC does and that's part of the arrangement to maximise fairly the tax collection that's due to Scotland I'm aware that because of the level of debt that built up through the pandemic that colleagues in HMRC have not only increased their own capacity but also used on particular situations the use of outsourced debt collection arrangements we would expect in the way that HMRC commissioned that activity that they do so in a way that is compassionate and proportionate a response you know to be taken in relation to the areas and I'm also aware that it may well be that HMRC are not only seeking through those measures to collect tax that's fairly due for Scotland but also other tax that may be due as well so we recognise that there is a challenge and that we do not have a particular direct linking this is part of what is still part of the overall administration arrangements that HMRC have to apply across the board to the UK I think it's fair to invite Jonathan to say about how they administer those contracts but I think we recognise there has to be a mixed economy in how tax debt is followed up I'm very much aware of the fact that tax debt is generated in an income that has already been earned by individuals and and obviously we will want to make sure that where the liability has been assessed that it is actually fairly collected but as I say in a compassionate and proportionate way because I'm very much aware that the tax is something that is then paying for public services in Scotland and paying for public servants like yourself so it's about keeping that the flow through so Jonathan I don't if you would like to just add a little more about how you oversee that debt collection arrangement but before we do that can I just ask you then you said that you were in that the Scottish Government's position is in favour of a mixed economy but I mean for example it doesn't have a mixed economy in the recovery of all the payments of social security it's got a very clear policy that any overpayment through the social security Scotland agency are recovered by in-house teams it's not outsourced to private debt agencies so why is this different? So this is based on the fact that the administration of income tax is by HMRC and we rely on the administration by HMRC deploying their arrangements on behalf of Scotland for Scottish income tax so there's a distinction between having something that is part of a Scottish administration directly by Scotland and an administration that relies on the systems processes and services that are part of HMRC it's quite a distinct thing and as I say individuals who owe tax have already had the income and obviously you want to make sure that the tax that's due on that income is is fairly collected but as I say it's important to us that that is still carried out in a compassionate and proportionate way Okay right I mean we've got just a couple of minutes left Jonathan half hour if you want to add to that please Yeah so So as Alison said we operate a debt service that's based on all debts owed to HMRC so in theory a number of different taxes could have given a risen to a debt so it could have been Scottish income tax or it could have been other other taxes or a mix mix of the two we only use debt collection agencies in certain certain roles so they they do desk-based work so they can they can make telephone calls they can write letters they can send text messages they never go out to visit visit taxpayers or or claimants and they don't take don't take enforcement action through the courts or those those sorts of things so their role is is limited we also oversee them they are regulated by the financial conduct authority and we also audit their behaviours to make certain they are abiding by our rules and processes one of the challenges we have at the moment is as an organisation at any one time we have about 40 billion pounds of outstanding debt and what we want to avoid is any of that debt becoming non-payment and that being lost lost to the exchequer so for us it's really important we collect the money that is due but we also need to make certain we do it in a proportionate proportionate way and you know one of the challenges we sometimes face actually with with with is people not coming forward if people come forward we can offer them time to pay arrangements or do other things to support them so we are mindful of of the challenges here and also given the wider economic circumstances that many people are feeling financially squeezed at the moment so I hope that that gives you a bit more context as to how we operate with debt collection agencies okay thank you we are really out of time so if I could just make one final request and that is I wonder whether you could supply to the committee in writing a list of those private debt collection agencies who are operational in Scotland that would be helpful look that's been a very useful session for us and can I thank Alison Stafford, Lorraine King, Jonathan Athau and Phil Batchelor for your evidence this morning we will of course consider whether there are any further steps that we would like to take but for the time being can I thank you very much for your for your evidence and I'll now draw the public part of this morning's meeting to a close thank you