 Rhaid styrwch am gael i ddweud i gyhoeddfaeth Ffynans y 7ol o'r ymgyrch yn 2016. Mae'n dda i ddim yn oed i gael eu rheum i'r wych wneud a chyfeol i ddiwethaf i'r ffynans ac i'r ddweud i gael ei bwyd. Rhaid graspwydnodd gan rheoeth. Rheumau 1, eu hunain yma, nid y gallw i fod yn gwybod i'r th reviews a'r rhaid fyddfaith i chi fod yn gyrdd, rhaid? Rheumau 2 i ar gyd yn gyd yn cydnodd iawn, ar ddigonwch agorau i'r rheumau of the land and buildings transaction tax. We have two separate sessions on LBTT today. The first one is considering the Scottish Fiscal Commission's 2015-16 outrun report. We are joined on this by all three members of the commission who exist at the moment. I welcome to the meeting Lady Susan Rice, who is the chair of the Scottish Fiscal Commission, Professor Campbell Leith and Professor Charles Nolan. I know members who will have received copies of the correspondence from the clerks. Lady Rice, I wonder if you want to make an opening statement. I'll just say a few words. First of all, thank you very much to the committee for having us. We met you and most of you met us at your business planning day, but we thought it was important that all three of us were here. Although the previous committee has seen Campbell and Charles regularly, this is Charles' first appearance before the committee, so you're really in the hot seat, Charles. Can you take a console to help me, Charles? To say just a couple of words, Charles is our interim appointee approved by yourselves up until April 1 next year. He came on board at the beginning of the summer and has just jumped in with two feet and has added huge value right from the beginning, so this transition has been really quite seamless for us. Charles, Professor of Economics at Glasgow University, but in early part of his career worked in forecasting at the Bank of England, so he brings a different perspective to our conversations. That's very good. Campbell, you know also Professor of Economics at Glasgow, and in terms of the outturn report, although there were lots of inputs to it, this was absolutely sort of led and shaped by Campbell at the late spring and early summer, so my thanks to both individuals. A tiny bit of context then. A reminder to the committee, I know you know this, but I remind people all the time who have any interests that we are in the third year, the commission is in the third year of acting in a capacity as a body that scrutinises forecasts that are produced by the Government, so we scrutinise. That is our only remit now, and we are a report on our findings. We are not doing the forecasting now. We are getting ready to begin that as of next April, but just a reminder. The second thing is that if one looks at previous evidence sessions, there has been some chat about all the different reports that seem to reflect housing or property transactions and tax, and so the LBTT intake. Just a quick reminder in Lehmans terms that we have for any property transaction, the date of the transaction itself, which then leads to the requirement that some tax be paid. The tax is then paid, but that's always subsequent, or generally subsequent to the date of the transaction. If the property transaction is towards the end of the month, the tax might well be recorded by Revenue Scotland in the following month. If you look at month figures, you've got a bit of disparity. Registers of Scotland register the transaction, but they wait until the tax return has been filed and the tax is in. There is a sequence that happens. Registers of Scotland will include all properties, including all transactions under £145,000, which don't attract the requirement for LBTT. Those of us who are looking just at tax obviously don't need to look at those transactions. Finally, the Property Federation, which also publishes statistics, we believe that they work on a calendar year rather than the fiscal year, so you've got different timeframes as well. We remind ourselves about these differences. It's just probably important to restate them here. We believe that if you go to the raw data behind Revenue Scotland, behind our Registers of Scotland, we can reconcile those numbers with ours. We're not troubled by what appears in the published reports to be disparities. We would say that if you are interested in forestalling as a phenomenon, you should probably not use the Registers of Scotland data because of the way it smooths the activity. It won't give you as clear a picture and they're not collecting data to reflect forestalling. That's all to say. The Outturn report, which you want to consider, is based on Revenue Scotland's outturn numbers, so that is the relationship that we've used. I've been asking questions about these issues in comparability from different sets of figures in previous meetings. That explanation of how that different sequence from different organisations produces apparent disparate information is helpful to me. I'm sure that it is to the rest of the committee. I'm interested in the forecasting model. I'm assuming from what you've said that it's a Government forecasting model in the meantime, but how it works in operation is interesting to me because it involves mean and median house prices as well as volumes of transaction forecasts. We can see all those things that can be brought together, but it's how they are applied thereafter that I'm struggling to understand and it would be helpful if someone could explain to me how that methodology or that modelling actually works. There are essentially three economic determinants going to the residential LBTT forecast, the average house price, the median house price and the volume of transactions. These are forecast separately by Scottish Government analysts. These are then converted into revenue forecasts based on the application of a probability distribution. This works as follows. You can imagine all the transactions taking place in the economy. Some will be for relatively inexpensive houses, others will be for expensive houses. What you find is that if you plot all those transactions for a given period of time, you can fit a curve to all those transactions, which explains the patterns that you see in the data. The curve that fits it is what's called a log-normal distribution. It basically says that if you were to randomly pick a transaction from the Registers of Scotland database, it would give you the probability that that transaction would have a particular price. There's a far higher probability that it's going to be relatively cheap and a very small probability that it's going to be a very expensive house. That distribution of price transactions seems to fit the data. What the Scottish Government does is it forecasts average house prices and median house prices and it uses those to shift this distribution forward. As average prices go up, you're going to have more transactions at the upper end of the market and less at the lower end. What the Government does is it forecasts average in the median and that relocates this probability distribution, then forecasts the total volume of transactions and then multiplies that by the probability that each transaction is going to be at a certain price point, then applies the tax rate that you would apply to a house of that size, that value and calculates the tax revenue as a result. It's complicated. The secondary question to that then is, with that model being applied and obviously the forecasts weren't quite where the out turn turned out, where do you think in the forecasting process that disparity, if that's the right word, actually arose? If you look at table 1 in our out turn report, this is exactly what we try to do. What we do in table 1 is that the first column of table 1 gives details of what was forecast for the relevant economic determinant. The second column gives what the out turn was, so average house prices were forecast to be £174,000, the average house price turned out to only be £166,000. The third column then runs that revised piece of data through this probabilistic model that's been developed for forecasting and computes a revised forecast. By combining all those different ways in which the forecast economic determinants were not quite the same as the out turns, we can compute a revised forecast, and by the combined effect of those would be that you would expect revenues of £196 million, not the £235 million that was originally forecast, which, if you add in the ADS for stalling between £5 million and £7 million, means that the probabilistic model in aggregate fits relatively well once you forecast average median house prices and transactions correctly. Thank you for that. Just for a start, just draw members' attention to my register of interests in respect to property investments. That's quite a lot in this, so I'll try not to chew up too much of the time. What you've basically done is compared the out turn to the forecast, which is fine as far as it goes, but the problem with that, of course, is that all that might mean is that the forecast was wrong and how the forecast was changed through the year. If the forecast is wrong, that's all that tells you. What I'm more interested in is the outcome compared to previous years, if that makes sense. If the total tax take has gone down compared to previous years as a consequence of the change to LBTT, it might be interesting to comment on that and we can drill into that in a bit more detail. Just coming back to the forecasting very briefly, I understand what you're saying about the modelling of that, but clearly there's no historical data to base that on because we've got to change. My statistics are a bit rusty, but I think that the log normal, depending on what value you have for the standard deviation, and if that's changed, then you're going to have a different profile. All the data that's telling you is that that's what's happened. The forecast aspect of the log normal hasn't fitted to what's happened because I've forecasted it correctly and picked the right values there. If you look at the average in the median, both of those are taking a downward shift and you're right that there's a tilt away from the upper end of the house spectrum because the difference between those two is bigger than it was before. With them both being down, that says that there's clearly an impact there in terms of the forecast is wrong because they expect their house prices in general not just the distribution to be higher than it was. That's kind of just maybe a comment on that round about the forecasting, but the biggest thing that I really want to talk about is how it impacts against previous years. In the data that I've seen, the number of transactions in the key 325 to 750 range look to be at least as high as they were previously. The number of transactions in the top range, I don't think there's any issue. They are apart from Fostall and they've held up very well as far as I can see. So maybe I just want to comment on that. A lot there. I'll try and remember each of them. Table 1 is essentially not just comparing the forecast with the outturn. It's trying to decompose the forecast error by rerunning the forecasting methodology with actual outturn data piece by piece. So what that suggests is that the biggest element of the forecast or the biggest impact in the forecast was through failing to forecast average house prices. The fact that average house prices didn't rise relative to median house prices is indicative of a shift in the transactions away from the top end of the market towards the middle and bottom end. That's largely the reason for the fall in revenues, which relative to expectations, which is what we then try to analyse throughout the next section of the report. So in terms of the standard deviation of the log normal, essentially once you know the mean and the median, those tell you the standard deviation. You can calculate the standard deviation from that. So the fact that average house prices have not risen relative to median house prices is telling you that the standard deviation has shifted and the shape of the distribution has moved towards the lower end of the market. In terms of comparing with historical data, that was kind of difficult because this is a completely different tax regime. I think when the tax regime was first implemented, it was designed to be revenue neutral. But then when the rest of the UK adjusted their tax regime, that lowered the tax take that you would have expected from that and tax bans and rates were adjusted for Scotland as well. So you wouldn't expect revenues from this tax regime to be comparable historically. In terms of historical transactions, we've been looking at decomposing the forecast itself. I think in the evidence that the Scottish Government provided to the committee in a meeting a week or so ago. They did look at transactions historically using registers of Scotland data. I think that it's table one of that document, if I remember correctly. I think that what they find is that over a two-year period there's substantial growth in many of the price bands except for the 325 to 750 band, which is increased by 1 per cent. One of the things that we referred to in our report last year was that there's a large fiscal drag effect in the Scottish Government's forecasts. This arises because as house prices rise, you pull more properties into this 325 to 750 price band. You would be expecting transactions in that zone to be increasing over time, not growing at just 1 per cent. If you look back at the data that I've got, and I've not compared that to your log norm, I've not had the time to do that, the percentage in the 325 to 750 range of total transactions is about 7.5 per cent, and it's been between 7 per cent and 8 per cent right through the last couple of years, apart from the quarter where the Fosthollan kicked in, where it was over 10 per cent prior to the change. That kind of suggests that the amount of transactions in that range hasn't changed as a percentage of the total, but what you are saying is that you would have expected it to increase because of the drag. I think that if you looked at the average numbers pre and post financial crisis, they were a bit higher and lower before. The share, if you looked at those two relative averages, would be marginally lower, I would expect, but you would expect it to rise over time for the reasons that I've just given you. I suppose that the final point is that, if the question is asked, has the increase or the change to LBTT hurt the tax take to the Scottish Government, which I think is the key question, you are saying that you can't answer that question because it's a different thing, it's apples and oranges? Yes, it was a different tax regime, so you weren't expecting it to generate the same amount of tax. OK, Mordo. Thank you, Comedian. I might just pursue some of the questions that Ivan McKee was raising. Just looking at table 3 in your paper, which has the outturned revenues against forecasts, the most sensitive price bracket is the 325750 bracket, as you mentioned, where, compared to the other brackets, there has been a substantial reduction in the outturned revenue compared to forecasts. I've bored members of this committee in the past with my personal anecdotes about the property market in the country areas. We've heard quite a lot of evidence from people who have spoken to the committee about the slowdown in the property market in larger properties, particularly in the country areas. Do you accept that there is an issue with the breadth of that band in the 325750? If the number of transactions in that bracket is holding up, that might be because we are seeing more transactions grouped at the lower end in the 300,000s and fewer over 500,000s, so that the level of transactions is the same, but the average price is therefore fallen, and therefore the tax take is fallen as well. Would that be fair? Yes, it is possible. We only have revenue Scotland data for the entire band. We do not have subbands within the band. It would be useful to have that information to do that kind of analysis. I think that that is something that the committee has picked up in a previous session that is trying to interrogate the data further to understand what is happening within such a broadband would be very useful. On the question of forestalling, you make a comment in paragraph 3.14 about the forestalling impact in March 2016, where, because of the impact of the additional dwelling supplement, there was a jump in the tax revenues in March 2016. Without that forestalling impact, the outturn would have been worse? Yes, transactions appear to have been brought forward into March, which is a particularly buoyant month. It is not obviously as buoyant in the following months, so it looks as though there is an element of forestalling there. If you took that away, revenues would be lower. You might expect that, as we work through without that forestalling being a feature, presumably in this financial year or in the subsequent debt, that will disappear. We will see a more normal pattern appearing. In the report, we only look at March and then we look at April to see whether those buoyant returns in March were sustained into April. Our tentative conclusion at the moment is that they were not, but we will continue to monitor our outturn data for this year as it emerges. My final question goes to the heart of the matter. It is covered by your comments in paragraph 3.24 about what has been happening in the market, particularly in the 3.25 to 750 band. Is it your view that the rate at which LBTT has been set affecting properties in that band, that is what has had an impact on reducing activity and therefore reducing the tax take? We cannot draw that definitive conclusion based on the limited data that we have at the moment. The report notes that that is the band in which revenues seem to be lower. There could be various reasons for that. One of them could be a behavioural response here, it could be other shifts in the market, it could be the log normal distribution as maybe not fitting the top end of the distribution as well as we would like it to. There are various explanations. We cannot rule out that possibility. We cannot definitively conclude that that is the case at present. We continue to monitor the data as it emerges. At what point do we get to where we would have sufficient data to be able to draw these conclusions? We need to be sure, for example, that we need to rule out all other options. We need to rule out the possibility that it was not damaged to the property market in the Aberdeen area that was causing this. We need to look at whether the log normal distribution was fitting the top end properly. We continue to explore that issue. Effectively, by ruling out all other options, you would conclude that we cannot reject that hypothesis. You think about additional dwelling supplement. It will be 18 months down the line before we have final data on that because there is a long period of reclaim. That will affect how we can take from the data. We have only one year's data at the moment. After ADS is all sorted, we will have two and a half years' data. We will be in a better position, but we cannot definitively claim that that would be enough. It is something that you are keeping close to. Most of the tax take comes from the top two bands. Clearly, if you are forecasting the tax take, you want to get those two right. Murdo, on the other hand, has had a discussion about the breakdown of the figures between 325 and 750. It is something that we have discussed with other witnesses who have come to give us evidence. Have you had any discussions with Revenue Scotland about how we get that breakdown information between 325 and 750 that were readily available? We requested data broken down as much as possible, and the data that was received was broken down by price band. I do not know whether a further breakdown would be available. Earlier this week, we have also asked the team and Governor's House to ask for a next round of data broken down as much as possible, not only by month and price band, but ideally by region as well. We want to look at the regional distribution of that as well to start exploring whether there are other explanations. We have got the revenue folk coming to us after this evidence taken session, so we can follow up with them. This is the time where you are so thankful that you studied maths and statistics for three years at university a number of years ago, and ultimately it comes in handy. I am so thankful for that. I followed most of the previous discussion on the log normal distribution and so on and so forth. The question that I had for you was—there was some discussion at the previous committee about the impact on the higher tax take range from 750K and above, and there was some discussion and contributions from colleagues who gave evidence last week that additional measures needed to be introduced to help that side of the market. That does not appear to be borne out by the data that you have presented here on table 3. Professor Leith, you referred to it earlier. You can see it in the bracket over 750K. In fact, that was the best-performing bracket in terms of tax return of all of them. I do not think that that data was available to us in previous weeks, but I think that that is quite clear. Would you confirm that I am reading your table correctly and that the higher value property bracket was in fact the best-performing against forecast? Yes. If you look at—maybe there is a graph that shows it more clearly. If you look at figure 2, it is just above paragraph 320. If you look at the bottom right-hand corner, that gives you—the black solid line is the tax take by month throughout the year, and the higher dotted line—or, no, the darker dotted line—I have it in black and white. For those of you watching in black and white— That is an academic. I only do black and white. Will you help me if you just give you the colour one now? That's it. My colleagues are most sophisticated in me—just about 320. The solid red line is the tax take by month throughout the year, and you can see relative to the blue line, which is the revenue that we expected by month throughout the year, that there is a significant amount of forestalling in the first part of the year. However, the revenues recover sharply, and the tax take is above prediction for that tax band, and then you get the big jump in March, potentially because of the first stalling effects of EDS. It does appear to be a first stalling effect at the early part of the month, but it is more than compensated for by the performance for that price band throughout the rest of the year. It reminds me of the snooker incident where, for those of you watching in black and white, the blue ball is behind the red one. You mentioned earlier, Professor Leith, that there was a shift to the lower end in the distribution curve, but the best-performing group is still the highest value property range. What would explain that if there was a shift towards the slightly cheaper end of the market? What would cause the best performance to be then the higher range? It is more of a twist in the distribution. The top end is holding steady, but then that 325 to 750 somewhere within that distribution things are tilting. Exactly why we cannot know for sure there is a variety of reasons why. The top end may just not be sensitive to paying that tax. On table 8, there are not any page numbers here. It is about the difference in forecast between the Scottish Government and OBR. It is quite difficult to interpret that just from the numerical table, but if you were to plot that, you would see that in terms of the OBR forecast, there was a significant reduction in their forecast in November 2015 compared to the Scottish Government forecast, which remained pretty steady. The outcome result was pretty close to what the Scottish Government forecasts were compared to the OBR. Could you offer any explanation as to why that would be and why there would be such a downturn in volatility of the OBR forecast? I think that the OBR November 2015 was looking at the outcome data for the year to date and that was being hit by the forstalling effect, so it was down. We need to ask them that they were extrapolating that for the rest of the year and using that to infer a revised forecast. Looking at the same data, why would they come to such a radically different forecast? The Scottish Government did not use the in-year data to do any forecast revisions. The more accurate and more stable forecasts seem to have come from the Scottish Government. The Scottish Government's forecast, the revised one, is essentially... For the 1617 budget, as a by-product of producing a forecast for that, they came up with another forecast for 1516, which is essentially just extrapolating the methodology that they already used for 1516. It's bound to be pretty close. I thought that I'd ask that. Adam Donkens? I wanted to ask different sort of questions about your reflections on the experience of devolved taxation so far, in terms particularly of the key institutional relationships and how you see them working, where you think the strengths are and where you think the weaknesses are. I suppose that I'm thinking in particular of the relationship between Revenue Scotland and the Scottish ministers. Is that the right model? The relationship between Revenue Scotland and HMRC, but don't feel that you have to confine your answers to those relationships if you think others are even more important? Obviously, one of the reasons why the committee is looking at LBTT is partly because we want to understand how LBTT is working, but partly because we've got an eye on the future as well as on the past in terms of thinking about the onward progression of fiscal devolution through the lifetime of the first half of this Parliament in particular. Are there any key lessons that you think we should learn in terms of institutional design and institutional relationships? I won't be able, without thinking for a minute or two, to respond to the key lessons, but what I would say is that you raise a really important point because the relationships amongst all of these different agencies matter. It matters that they are formalised and that the interactions are done in a disciplined way, and that's done typically through memoranda of understanding. It's important that there is good co-operation where needed. It's easier for me to respond a little bit by anecdote because our own role will be changing, and therefore our relationship to the agencies that you mentioned will change quite deeply come April 1. We're very thoughtful about this issue. Up until this point, including this year, the OBR, when it's been doing its forecasting in the areas that involve taxes here, has invited the commissioners to join in their challenge meetings, which are the meetings enroute to coming up with their forecast. There has been a good working, informal, if you will, but working relationship between the OBR and the SFC that's developed over the last two and a half years since we've existed. We anticipate that relationship to continue to be mutually supportive when it's appropriate, and indeed the legislation requires that we work together and we think that means working together properly. The OBR would typically, for income tax, get data from HMRC. HMRC, like Revenue Scotland, has an obligation legally, I believe, to protect identity. So what is delivered, for instance, to the OBR may be analysed by HMRC staff and then the answer to a particular question is given outside of the HMRC in a way that doesn't reveal individual identities. So those kinds of disciplines Revenue Scotland has to, and it's our understanding that they do, I mean we don't critique Revenue Scotland, but that they would behave in that way. As questions come up, and for us in Scotland, as the devolved taxes also increase in number, each one is a little different from the other, we have to work out how these relationships will need to work and we do that through engagement and then the development of a memorandum of understanding for each agency. So you're asking if these things work well, I think it's very hard for us to make that judgment, to be very honest, but I really do want to emphasise how important a question it is and how important it is that we work to make those relationships work well. So there are no particular points of concern or anxiety that you have about the institutional framework of devolved taxation that you'd like to bring to our attention? I would not, to be very honest, I mean maybe my colleagues would speak up, but the question is so broad, I would be troubled to say I have a thought through evidence-based response to that question at this stage. We will perhaps think more about that. Charles, do you have anything to... No, I... As you say, it's quite a broad question and I need to really think about it to say something sensible, I think. I think I would just maybe make one point. So at the moment we're going through the transition from being a body which scrutinises the Scottish Government's forecasts to being a body which produces our own forecasts. If you look at the way that OBR does this, that they have relationships with various other bodies, that they provide certain key macroeconomic determinants to HMRC, who will then deliver a forecast of the tax revenues those economic determinants imply. We're in the process of developing a kind of operating model which explores whether we'll do it this way or maybe some other way with Scottish Government, with HMRC, with the Department of Work and Pensions, with Revenue Scotland, all these various bodies. I think the key principles underpinning that is that we need to ensure that the Fiscal Commission has independence, that it owns the forecasts that it produces and to the extent that it is logistically and resource-feasible, owns the models, owns the data analysis, has the resources to do that without relying too much on Scottish Government analysts. Thank you very much. I'm not saying that I was indicating that I've got any other questions at this stage, but I'm giving evidence this morning. We're very grateful for you giving us your time and we'll speak to you over the coming years again. At the moment, I suspend this particular part of the meeting to allow change over our witnesses. If somebody also wants to get a refreshment, please feel free to do so. Colleagues, we'll now continue to take consideration of the first-year's operation of LBTT by taking evidence from Revenue Scotland which is responsible for collecting the tax. Today, we're joined in this session by Elaine Lorimer, who's the chief executive of Revenue Scotland. Just for information on my colleagues, Elaine is also a member of the budget process review group which had its first meeting last week. I'm obviously a very important organisation as far as this. The committee is concerned and we're also joined by Chris Myerscoff, the head of tax. I welcome our witnesses very warmly to the committee meeting proceedings this morning. I believe that you might have a short opening statement that you'd like to make. Just a very short statement, thank you very much. Thank you very much to you and your committee for inviting Chris and I to join you this morning. I'm conscious that the committee will have seen the written evidence we've submitted so I'll use this opportunity if I may just to highlight some key points from our evidence. Most of the things I want to talk about are about the delivery of our organisation over its first year of operation. In our first year, we've delivered a robust, secure online system for collection of tax with 98.1% of tax returns submitted online. We've established strong collaborative working relationships with the main professional bodies in Scotland as well as the Scottish Government, the Scottish Fiscal Commission and HMRC. We've developed legislative guidance, including the use of case studies that are accessible and appropriate, involving the Law Society, the Chartered Institute of Taxation and ICAS and others in their production. That remains an on-going dynamic process as we delve deeper into the application of our legislation to technically complex transactions. We've collected £425 million of land and buildings transaction tax that has gone into the Scottish Consolidated Fund to contribute to the funding of services in Scotland. We've delivered the introduction of the additional dwelling supplement against a challenging timeframe and collected around £35 million of that supplement since April. We've commenced our approach to compliance, using the powers granted by Parliament to protect our revenue. We've delivered all of that within a budget of less than 1% of the tax that we've collected. It's a privilege to be the chief executive of Scotland's Tax Authority since the Act of Union. We at Revenue Scotland are very aware of the responsibility that Parliament has given us to deliver our statutory met. We want to deliver that in a way that is modern, efficient and robust but with a strong sense of public service at its heart. I hope that the evidence that we give this morning will be helpful to the committee and we are ready to provide you with any further information as following our discussion today. Thank you very much, Elaine. I'm very grateful for that opening statement. Ash Denham, I think that you've got a question late to ask. Good morning. You might be aware that the committee has held a number of sessions on the operation of LBTT and, obviously, Revenue Scotland has come up a number of times within that. I just wanted to start off by saying that many of our witnesses have expressed that they're very happy with the operation and probably would characterise it as being modern and efficient, as you say. However, one of the submissions that we had recently was from the Low Society, and this is probably quite a small area, but I was interested in your comments on it nonetheless. They said that they felt that in some areas the guidance in the more technical areas might be lacking, so I'll just read what they said in one area. They said that there were areas where there were equivalent guidance from HMRC but none from Revenue Scotland and other areas where Revenue Scotland had indicated HMRC but had not issued the guidance. I'll be interested in your comments on that. Thank you. I'm aware of what the Law Society said in relation to that. I think that the production of guidance is something that, obviously, we've been working very hard to achieve over our first year of operation. It's fair to say that it would be impossible for us to provide definitive guidance on every particular aspect of our tax. We have to work with the legislation that Parliament set us. We have to apply that legislation to the facts as they present themselves to us. Some of the more technical transactions, as you can imagine, would be very difficult for us to produce definitive guidance about that because they're so fact-specific. I am conscious of the fact that the society and, in fact, the Institute of Chartered Accountants in Scotland would like us to be more definitive in relation to where our legislation on the face of it looks pretty similar to the legislation in England and Wales and where HMRC have taken a view in relation to their legislation. That's quite difficult for us to do so early on in our operation because although on the face of it the legislation looks very similar, it's operating in entirely a different context in Scotland. Our view is that we really need to have the opportunity to consider transactions which are very technical, very fact-specific. It's only once we've had the experience of working through a number of those sorts of transactions that we might feel that we're in a place where we would be able to update our guidance. Our thing that I'd like to say, if I may, is that because we work so closely and collaboratively with the professional bodies in Scotland that we're aware of a number of technical areas where they would like us, if possible, to come out with not quite guidance but a more technical view. We've been working over the summer in order to try to produce something like that. It's our intention within a very short period, I hope, within the next month or so, that we would be able to publish what we would call a technical update which doesn't go so far as to go into our guidance but provides a bit more guidance on some of the technical issues that the Law Society in particular have raised. Neil Bibby. As Ash Denham said, the majority of the submissions that we've received seem to suggest that Revenue Scotland are performing well in terms of ministering and collecting the tax. However, there are obviously a couple of concerns that have been raised and one of those is obviously around the Law Society have talked about the negative feedback in relation to a pinion service and they've actually said that it may be due to a lack of funding. The Scottish Property Federation have said that Revenue Scotland need to invest in awareness of its services and to prepare for the implementation of the rent reassessment process for non-residential rent, so I'd like to ask do you feel you're adequately resourced at the moment to do the functions that you need to do and going forward do you need to have more resources? That's a lovely question to ask a chief executive because most of us would say, well of course we'd love extra resources but seriously I think when you look at our opinion service which is possibly the root of some of your question there we have a 25 day target that we set ourselves working day target to turn opinions round and we have delivered the vast majority I think there's only three out of all the opinion requests that we received that we didn't meet that deadline and that was because they were so technical and we needed to get legal advice and counsel's opinion even perhaps on some of those in relation to the resources though I think we have demonstrated with the way in which we've achieved our targets in our first year of operation we have actually been adequately resourced I mean clearly there's always more we could do in terms of further investment in our website or we could do more outreach type work but that's not to say we haven't been able to invest in our website or do outreach work so sitting as I am at the moment as far as I'm concerned the resources that we have had in our first year of operation have more than demonstrated that we've been we've had sufficient to be able to do what Parliament has asked us to do I'm very conscious of the fact though looking forward the expectations on our organisation are going to grow we're going to be asked to deliver additional taxes we know that your passenger tax for example is likely to come our way and so part of what I need to do in the discussions which we will be undertaking with the Government around the way in which we would wish to implement that tax we will need to make sure I will need to make sure that we are given sufficient additional resource in our systems to be able to invest in a small number of additional staff for example to be able to take on any new tax in terms of when you're talking about a small additional number of staff how many currently how many people are employed in every new Scotland and how many roughly would you think you would need to take on those additional responsibilities we have around 50 staff at the moment in the organisation and the staff in SIPA one of the things which our organisation is held up for is the way in which we have taken a very efficient very sort of lean approach to the way in which we have designed the organisation and part of that has included looking at other organisations in Scotland who we can work in partnership with and in fact we have used our powers to delegate functions we've delegated to SIPA we've delegated to the registers of Scotland for some aspects of our work rather than building up a big machine centrally so we have around 50 staff within our organisation but we also fund a dozen staff in SIPA for example who work on our landfill tax with us Adam I just wanted to pick up a little bit on the sense that Ash Denham's already raised with you from the Law Society and one of the phrases that the Law Society used in oral evidence to us that I found very striking as an academic lawyer was the idea that we are taxed by statute and untaxed by extra statutory concession and I know that that's a model that HMRC have been using for a very long time indeed is it the right model for Scotland or is it desirable is it inevitable are you content with it? It's not the model that we have in Scotland at all and speaking just personally I'm not entirely sure that that would be the model that we would want to follow Chris knows more about this than I do so I may bring her in here but I think it's really important that the legislation is clear and that the legislation sets out publicly the parameters of the remit of the tax and what our role in relation to the collection of management of those would be and so for us to come forward we don't have the powers Do you think that we've achieved that with LBTT? Do you think that the legislation on LBTT is sufficient and clear to meet that test? I think the proof will be in the pudding I think obviously we've had a successful first year in working with that legislation I think where the legislation as with any tax legislation will be tested will be in the light of experience in the light of the more complex technical questions that might come our way and it's only when we have those to consider will we be able to see whether our legislation is clear enough for us or not and that's where the tax tribunal effectively its role may come into play because there will be some aspects as there always is with the interpretation of legislation where judgment calls are being made where it needs to be put to test and the only place where you can get that definitive answer on the interpretation of the legislation is via the court or via the tax tribunal but as it stands at the moment we are able to work with the legislation as we find it Thank you Chris, did you want to add anything? No, the comment that the Law Society made we picked up on that as well and I think actually what they said was they didn't want that to be the case they didn't like the idea of being taxed charged by the legislation and then effectively uncharged by the guidance and how we see our guidance is to explain to people how the legislation applies not to define how the legislation applies to legislation if it's good legislation which as I said we have no reason to believe it's not should stand on its own in that respect Just panning out from that if I may and just thinking about institutional structures a little bit more broadly obviously we're interested in LBTT partly for its own sake but partly also looking forward with a view to more fiscal devolution in the first half of this Parliament do you think we've got the broad institutional structures right and in particular I'm thinking I suppose of the relationship between Revenue Scotland and Scottish ministers and also the relationship between Revenue Scotland and HMRC are there any aspects of the institutional landscape that you'd like to draw to our attention with a view to us doing better than we currently do or are you quite content? I think in the main they work well as I had the benefit of listening to Lady Rice's evidence earlier and she talked about the need for discipline in the conduct of those relationships because we all have our own sort of clearly defined remit and I think it's fair to say that there are different structures in place so in relation to our relationship with the Scottish Government we have a very clearly defined framework document which sets out from our perspective in working detail if you like how the relationship should work between us and the Scottish Government recognising our independence in relation to HMRC clearly we have mutual interest because taxpayers don't just stop at the border and so there are issues which we would want to be talking to HMRC about potentially in relation to particular taxpayers and so we have information sharing agreements which are properly regulated we have memoranda of understanding that sets out clearly what the relationship should be and importantly from the taxpayers' perspective on how taxpayer information is protected within those boundaries and we also have, because we've delegated our functions, some of our functions to SIPA and to the registers of Scotland we also have to have those relationships properly defined as well because clearly we are as an organisation asking them to undertake some of their functions for us and I've missed out the fiscal commission it's a complicated landscape but we have, with all of those players in that landscape, we have clearly defined relationships in place underpinned by some form of agreement or memorandum of understanding so we have the structure there of course what really matters what really matters is also the relationships to make all that underpinning framework in place you actually need to have the relationships working too from my perspective, since I've arrived I certainly haven't seen anything that would cause concern in terms of everybody recognising where they're coming from but also wanting to make the system work Thank you very much James Kelly Thanks a lot, convener I'm just interested in the compliance activities that you noted in your submission and it's obviously welcoming to note that you've collected £450,000 from that compliance activities just to test that out just to say I decided to purchase a property for say £450,000 but I just completely ignored making an online return I decided I wasn't going to pay any tax on it, how would you catch me? You said that on the table I'll be checking your record to see I'm not sure I want to answer that rule before him Obviously the first instance that we as you have gathered that we formally find out about a transaction is with the submission of the tax return so I guess your question is what happens if I don't make a tax return and this is on the basis, and Chris will keep me right, but on the basis that you would wish to register your ownership of the property with registers of Scotland we would find out that you'd registered your ownership of the property and therefore we would be looking to undertake compliance I think the difficulty you would have is in registering your property because the keeper requires confirmation from us that the tax return has been received and tax paid before she's able to accept application for registration so if you're happy to do that and not have your title registered and take that risk then so be it something like that regularly sooner or later either Revenue Scotland or HMRC would catch up with you because obviously we've got a considerable matter of other data and intelligence at our disposal as I have HMRC so bye, I'll beware, they say That was the number I'll get you In terms of the previous evidence sessions that we've had we're aware that Revenue Scotland publishes out-turn data for LVTT on its website and that's obviously been very useful to us but there's also been evidence led by witnesses that suggested that that would be helpful to have it not just in terms of the tax bands but also what happens within these tax bands and also regionally is that something that would be possible for Revenue Scotland to produce at this stage? I think everything is possible I think what I would want to bring to the committee's attention though is that the production of some of this data isn't just about pressing some buttons on a system and our management information comes out I think part of what we have learned over our first year of operation is that the level of information the level of data and the way in which that data can be manipulated is of increasing importance to organisations like the Fiscal Commission to the Scottish Government and the data that we publish if you like is our basic factually correct, accurate data for our purposes essentially is a tax authority what we are being asked to do is produce other types of data which on the face of it wouldn't necessarily be critically important for us as a tax authority so we have been working with the Scottish Government and the Fiscal Commission and the Office of Budget Responsibility they also ask us for data to come to a consistent view as to what those additional calls on our data would be so that we can look into how achievable that is some of it, yes, we have the information it would require some additional time on the part of our statistician in a way that he would feel was robust and he was comfortable with releasing it other aspects of some of the information we might be asked for might require a system change and that's not so straightforward so we are in a position where we are able to provide some extra levels of detail to the information that we provide at the moment we're just working with the respective bodies to get a feel for is there anything else that we would want that we can then plan into our workload the release of that further information I think the other thing I'd like to say too is that transparency is really important to us because of our independence and so what we would be wanting to make sure is that where we are being asked to produce on a regular basis data say by band or say by local authority we were publishing that alongside the data that we currently publish so that there is absolute visibility but we are looking at it I just wanted to add that for us obviously it's essential that the data that we publish is accurate and can be relied on as well as the work to actually cut the data separately there would be additional validation work required so for example I heard fiscal commission saying they would like to know things by area and certainly we do collect local authority area codes but what we would need to ensure is that those then match up with the postcode of the property and that someone has selected the right area code so it's around making sure that not just that we can cut it but that what we're giving them is accurate so they can rely on it Does anybody else have any other questions that I'd like to ask? I've not been indicating from anybody else well thank you Elaine, thank you Chris sorry, Noree, apologies I was going to just ask a little bit about the additional dwelling supplement you say it was introduced with a very challenging time frame I've heard from previous witnesses that we may not have quite got the exemptions correct or there's been suggestions that we should give better different exemptions or different time frames for repayments to be claimed I wondered if you have any thoughts on whether it has posed difficulties with the collection and management of that tax the additional dwelling supplement particularly and whether there are refinements that we need to consider making I think it's difficult for me to get into matters of policy because clearly that's not my role what I would say is that in terms of lessons learned from introducing that tax what we as an organisation were able to demonstrate was that we could introduce something like that without a whimper it just happened and that involved system change that involved huge work on our part collaboratively with the law society and others to produce our guidance but it's not a time frame that I would like to be in a position of having to operate too often not so much to do with our organisation being ready there's more to do with advisors being ready externally essentially Scotland being ready for a new tax so I think in terms of lessons learned for us in relation to ADS it is more to do with the amount of time that it should properly introduce a new tax into the system in Scotland that we need to have and that's the sort of information that we are feeding into our colleagues in Scottish Government in terms of the planning for your passenger tax for example I'm mindful of the issues that came up during the debate on the legislation for ADS and I'm conscious that commitments were made for example around looking at the grace period et cetera so we stand ready with our data to assist Scottish ministers in their assessment of whether the policy is working or not of the fact that they've got commitment to come back to the Parliament about it I guess that comes back to some of Adam Thomson's questions around the institutional issues as well because if there's a tax change coming in Scotland or if there's legislation coming through the Scottish Parliament it's something that you'll be visible with but if Westminster take a specific decision to tain the tax at the drop of a hat that seemed to happen in that circumstance that gives organisations in Scotland less time to react in the way that the employer met being preparation time within the UK Government might not be in that same preparation time that's right that places huge stress on an organisation like ours but we were able to deliver I suppose at the cost of maybe spending more time developing our guidance we had to take a view on what our organisational priorities were for that last period in terms of always being ready I think it's part of the challenge of being the tax authority that change is always going to happen it's a very dynamic taxation is a very dynamic environment and so when I'm thinking about the resources that I need in my organisation and what we need to have in terms of a small permanent resource we need to have a small permanent resource and we do have that in our organisation which is skilled in quickly putting together a programme of change essentially what this is to redesign our systems to produce our guidance etc so there is a recognition that because tax is so dynamic the tax authority does need to and if we're going to have to do things quickly we need to have the capabilities and organisation to react and respond to that so that we can deliver well thank you very much for coming along and giving us some very clear evidence this morning very grateful to you and again thanks very much at the start of the meeting we agreed that we'd take item 3 in private and we'll remove this session into private session but before doing so just to quick notice the next meeting where the committee will take place on Wednesday the 26th of October when we'll take a final evidence station taking an LBTT from the Cabinet Secretary for Finance and Constitution and I suspend this meeting at this stage when we move into private thank you very much