Taxation in Scotland today involves payments that are required to be made to three different levels of government: to the

UK government ga, Rialtas a Shoilse gd, Riaghaltas a Mhòrachd , image = HM Government logo.svg , image_size = 220px , image2 = Royal Coat of Arms of the United Kingdom (HM Government).svg , image_size2 = 180px , caption = Royal Arms , date_es ...

, to the Scottish Government and to

local government Local government is a generic term for the lowest tiers of public administration within a particular sovereign state. This particular usage of the word government refers specifically to a level of administration that is both geographically-loc ...

. Currently 32.4% of taxation collected in

Scotland Scotland (, ) is a Countries of the United Kingdom, country that is part of the United Kingdom. Covering the northern third of the island of Great Britain, mainland Scotland has a Anglo-Scottish border, border with England to the southeast ...

is in the form of taxes under the control of the

Scottish parliament The Scottish Parliament ( gd, Pàrlamaid na h-Alba ; sco, Scots Pairlament) is the devolution in the United Kingdom, devolved, unicameralism, unicameral legislature of Scotland. Located in the Holyrood, Edinburgh, Holyrood area of the capital ...

and 67.6% of all taxation collected in Scotland goes directly to the UK government in taxation that is a reserved matter of the UK parliament.

History

Until the 17th century, taxation was regarded as 'an extraordinary source of revenue that was levied for a specific purpose such as the defence of the realm'. However, during the 17th century,

Parliament In modern politics, and history, a parliament is a legislative body of government. Generally, a modern parliament has three functions: representing the electorate, making laws, and overseeing the government via hearings and inquiries. ...

permitted a Land Tax to be collected from 1667, a

Hearth tax A hearth tax was a property tax in certain countries during the medieval and early modern period, levied on each hearth, thus by proxy on wealth. It was calculated based on the number of hearths, or fireplaces, within a municipal area and is cons ...

from 1691-1695 and a

Poll tax A poll tax, also known as head tax or capitation, is a tax levied as a fixed sum on every liable individual (typically every adult), without reference to income or resources. Head taxes were important sources of revenue for many governments fr ...

from 1693-1699. The 1707

Union Union commonly refers to: * Trade union, an organization of workers * Union (set theory), in mathematics, a fundamental operation on sets Union may also refer to: Arts and entertainment Music * Union (band), an American rock group ** ''U ...

of the

Kingdom of Scotland The Kingdom of Scotland (; , ) was a sovereign state in northwest Europe traditionally said to have been founded in 843. Its territories expanded and shrank, but it came to occupy the northern third of the island of Great Britain, sharing a la ...

with the

Kingdom of England The Kingdom of England (, ) was a sovereign state on the island of Great Britain from 12 July 927, when it emerged from various Anglo-Saxon kingdoms, until 1 May 1707, when it united with Scotland to form the Kingdom of Great Britain. On ...

formed a new

Kingdom of Great Britain The Kingdom of Great Britain (officially Great Britain) was a sovereign country in Western Europe from 1 May 1707 to the end of 31 December 1800. The state was created by the 1706 Treaty of Union and ratified by the Acts of Union 1707, wh ...

, so that responsibility for taxation in Scotland became a matter for the

Westminster Parliament The Parliament of the United Kingdom is the supreme legislative body of the United Kingdom, the Crown Dependencies and the British Overseas Territories. It meets at the Palace of Westminster, London. It alone possesses legislative supremac ...

, now the legislature for the new state.

Devolution of tax powers

The creation of a devolved Scottish parliament in 1999 was accompanied by a limited transfer of taxation powers: the

Scotland Act 1998 The Scotland Act 1998 (c. 46) is an Act of the Parliament of the United Kingdom which legislated for the establishment of the devolved Scottish Parliament with tax varying powers and the Scottish Government (then Scottish Executive). It was on ...

transferred the power to legislate for local taxation and also the power to vary income tax by plus or minus 3 pence in the pound. Most taxation powers in Scotland following the creation of the parliament remained a reserved matter for Westminster. Following the

Calman Commission The Commission on Scottish Devolution ( gd, Coimisean Fèin-riaghlaidh na h-Alba, sco, Commeessioun on Scots Devolutioun), also referred to as the Calman Commission or the Scottish Parliament Commission or Review, was established by an oppositi ...

, the

Scotland Act 2012 The Scotland Act 2012 is an Act of the Parliament of the United Kingdom. It sets out amendments to the Scotland Act 1998, with the aim of devolving further powers to Scotland in accordance with the recommendations of the Calman Commission. It ...

transferred powers over

Stamp duty Land Tax Stamp duty in the United Kingdom is a form of tax charged on legal instruments (written documents), and historically required a physical stamp to be attached to or impressed upon the document in question. The more modern versions of the tax no ...

, and Landfill Tax (both since replaced by

Land and Buildings Transaction Tax Land and Buildings Transaction Tax (LBTT) is a property tax in Scotland. It replaced the Stamp Duty Land Tax from 1 April 2015. LBTT is a tax applied to residential and commercial land and buildings transactions (including commercial purchases ...

and

Scottish Landfill Tax Scottish Landfill Tax (SLfT) is a tax which is charged in Scotland under the Landfill Tax (Scotland) Act 2014. It replaced the UK Landfill Tax from 1 April 2015. Revenue Scotland administers and collects SLfT with support from the Scottish En ...

, respectively) and reduced rates of Income tax in Scotland by 10 pence in the pound at all bands, reducing the

Barnett formula The Barnett formula is a mechanism used by the Treasury in the United Kingdom to automatically adjust the amounts of public expenditure allocated to Northern Ireland, Scotland and Wales to reflect changes in spending levels allocated to public se ...

by the equivalent sum, and requiring the Scottish parliament to set a Scottish Income tax rate to replace the lost revenue but with the ability to set it higher or lower than 10 pence in the pound if it wished. Following promises made during the Scottish independence referendum that led to the

Smith Commission The Smith Commission was announced by Prime Minister David Cameron on 19 September 2014 in the wake of the 'No' vote in the 2014 Scottish independence referendum. The establishment of the commission was part of the process of fulfilling The Vow ...

, the

Scotland Act 2016 The Scotland Act 2016 (c. 11) is an act of the Parliament of the United Kingdom. It sets out amendments to the Scotland Act 1998 and devolves further powers to Scotland. The legislation is based on recommendations given by the report of the Smi ...

added powers over

Air Passenger Duty Air Passenger Duty (APD) is an excise duty which is charged on the carriage of passengers flying from a United Kingdom or Isle of Man airport on an aircraft that has an authorised take-off weight of more than 5.7 tonnes or more than twenty seat ...

and full control over Income tax on non savings and non dividend income (excluding the personal allowance which is still set by the UK parliament.) Despite these tax powers having been transferred, over half of all taxes collected in Scotland remains under the direct control of the UK parliament which has remained a reserved matter to itself all powers over

Corporation tax A corporate tax, also called corporation tax or company tax, is a direct tax imposed on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at ...

National Insurance National Insurance (NI) is a fundamental component of the welfare state in the United Kingdom. It acts as a form of social security, since payment of NI contributions establishes entitlement to certain state benefits for workers and their famili ...

Value-added tax A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end ...

(VAT),

Capital gains tax A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, bonds, precious metals, real estate, and property. Not all countries impose ...

Inheritance tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an ...

, Aggregates Levy Insurance Premium Tax and Motoring taxes.{{cite web, title=What are Scotland's tax powers? , url=https://www.bbc.co.uk/news/uk-scotland-scotland-politics-35866776%20%22What%20are%20Scotland's%20tax%20powers?", date=30 November 2016, access-date=7 February 2018

History

Devolution of tax powers

See also

References