Devolution: ‘Benefits must outweigh costs’

In a submission to the Smith Commission, Icas said any transfer of tax powers should take place on a step-by-step basis to avoid unintended consequences. Picture:PA

The devolution of further income tax powers to Scotland could result in greater cost and complexity for taxpayers, Icas has warned.

In a submission to the Smith Commission, Icas said any transfer of tax powers should take place on a step-by-step basis to avoid “unintended consequences”.

The commission, headed by Lord Smith of Kelvin, is currently considering greater autonomy for the Scottish Parliament in the wake of the No vote on Scottish independence last month.

• Lord Smith of Kelvin tells Andrew Whitaker why he’s convinced a consensus on powers is possible.

Individuals and organisations across Scotland have been asked to submit their views to the commission by 5pm today.

On the devolution of specific powers Icas said: “Tax powers should only be devolved where they generate benefits which outweigh the costs of setting up those powers.

“Further devolution of income taxes should be implemented on a step-by-step basis in order to avoid problems in implementation and the risk of unintended consequences.”

It added: “The greater the extent of tax devolution, the greater the likely cost to taxpayers in areas such as new IT systems, restructuring HMRC staffing and taxpayer data extraction.

“Care must be taken to ensure that decisions on devolution of powers will not lead to commitments that cause significant disruption to employers and tax authorities, and which have not been adequately thought through.

“Any additional layer of tax administration is in danger of adding costs and complexity.

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“There have been too many large IT projects that have turned out to be unwieldy or have failed.

“This, combined with the significant change programmes currently under way in HMRC at the same time as staff numbers are being reduced, suggests that the devolution of taxes to Scotland, or elsewhere in the UK, should be undertaken on a staged basis.”

Icas called for the Scottish Parliament to become more accountable to taxpayers and for scrutiny to become “more rigorous and effective”.

An Ipsos Mori poll of its members in Scotland found that 88% want increased accountability while 68% favoured some form of further devolution.

The body wants to see air passenger transport duty transferred to Scotland to allow airports to be more competitive and open up more direct routes to new export markets.

It calls for the power to establish a Scottish minimum wage and for the UK’s single economic and currency union and regulatory framework to be retained.

Holyrood’s borrowing powers should be increased to allow for more investment in infrastructure projects and a Scottish Office of Budget Responsibility set up, it says.

Chief executive Anton Colella said: “Further devolution is a complex and delicate balance.

“Our submission sets out how we think the wish of the people for further devolution can be achieved without causing unintended consequences to the aims of doing better business, creating wealth and jobs and achieving a fairer society.”

• In the first of a new series exploring what civic Scotland wants from the Smith Commission, Stephen McGinty finds out the views of the STUC

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