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The Finance Committee took evidence on the Scottish Fiscal Commission Bill and on the Scottish Rate of Income Tax
This week's portfolio questions focused on finance and the economy
Scottish Labour then led a debate entitled Supporting Scotland's Children looking at restoring tax credits cuts
The future of the troubled Scottish steel industry was the topic of this evening's member's debate
Prof. David Bell says it is for HMRC to be able to determine where people are in relation to tax liability.
HMRC have not been all that effective in pursuing people in terms of evading tax.
SNP MSP John Mason asks if there are quite a lot of differences between how people in different countries behave in relation to income tax.
Prof. Bell says, emphatically, yes.
He points out there are differences within countries, like in different states in the US.
This makes it different to take lessons from other countries and expect them to have the same impact in Scotland.
The academic says that it is not unusual to have different tax rates.
Prof. Bell says there is an optimum for income tax rates which are higher than those leveled in the UK.
Image source, ThinkstockThe academic says the Scandinavian economy have had very high rates of income tax but have not significantly fallen behind the rest of Europe in terms of economic growth.
The key elements of the Scotland Bill include:
Image source, PAProf. Bell says it is important changes made to the bottom rate of income tax still retain an incentive to get people into the labour market.
Prof. David Bell explains that changing the upper rate of income tax, either upwards and downards, does not lead to a simple calculation as to tax revenues.
Prof. Bell points to the complexity of the estimates which have a wide range.
The Scottish rate of Income Tax was introduced in the Scotland Act 2012, external.
Depending on the level the Scottish Parliament sets the rate at, Scottish taxpayers may pay a different rate of Income Tax to the rest of the UK.
The Scottish rate of Income Tax doesn’t apply to income from savings such as building society, interest or income from dividends. This rate will stay the same for all taxpayers across the UK.
The Scottish government is expected to announce the proposed Scottish rate of Income Tax for the tax year 2016 to 2017 in its 2015 draft budget.
Prof. David Bell says he does not think that Scotland could offer a lower rate of tax for people migrating to Scotland, but keep a different rate for domiciles, as the Scotland Bill stands.
This worked successfully for Denmark, he says.
Committee convener Kenneth Gibson asks about the impact of higher rates of income tax in Scotland balanced with a the quality of life.
Prof. David Bell says the young tend to migrate, as well as the better off who can afford the cost of moving.
The academic says there is not just the fiscal cost of moving but also the psychological cost of moving.
It is not obvious that a lower tax rate would make a big difference to migration, says Prof. Bell.
Professor David Bell from the University of Stirling says even if you increase the additional rate of income tax you are not going to get a huge amount of extra revenue.
Prof Bell. says it is necessary to think about both bands and rates, both equally important.
He says the Scandinavian model has many more bands, creating more steps, than the UK income tax and SCRIT.
Further income tax powers for Holyrood should come into force in 2017 - a year earlier than expected - according to the Scottish secretary.
The forthcoming Scotland Bill will devolve control over rates and bands of income tax to the Scottish Parliament.
David Mundell said the UK government was keen to see the new powers transferred by April 2017 in October.
The Scottish government said it would not support a deal that left Scotland worse off.
Prof. Bell says changes in tax payers behaviour is difficult to predict.
The academic says leaving a job, retirement and emigration may all lead to lower tax rates.
Avoidance of tax and the decreasing of effort in a job by a tax payer can also have an impact.
The Scottish government must "ca'canny" when considering changes to the Scottish Rate of Income Tax.
Professor David Bell from the University of Stirling is now giving evidence on the Scottish Rate of Income Tax.
From 1 April 2016 the Scottish Parliament will have responsibility for a Scottish Rate of Income Tax. Charlotte Barbour from the Institute of Chartered Accountants of Scotland explains what is set to happen.
Find the full explainer here.
Image source, Getty ImagesThat concludes the second evidence session on the Scottish Fiscal Commission Bill.
The second evidence session on the SFC Bill draws to a close
The Barnett formula is a system of grants which dictates the level of public spending in Scotland, Wales and Northern Ireland.
Under it, extra funding - or cuts - from Westminster are allocated according to the population size of each nation and which powers are devolved to them.
When the UK government increases or decreases funding for departments such as health and education in England, the Barnett formula is used to decide how much devolved governments will receive.
The formula is named after its inventor, the former Labour Chief Secretary to the Treasury Joel Barnett, who devised it in the late 1970s.
Dr Jim Cuthbert says the current operation of the Barnett Formula is not what it should be and as things get more complex, there will have to be a step change from the Scottish government.
Professor Ronald MacDonald from University of Glasgow says he does not like the lack of transparency around the Barnett Formula.
Professor Ronald MacDonald from the University of Glasgow says in the future, there may be the development of independent economic forecasters, which may negate the need to have forecast from both the Scottish government and SFC.
Mark Taylor says Audit Scotland has a number of practical rules to ensure its independence, but there must be an ongoing relationship with government officials.
Audit Scotland's reports illustrate its independence best, says Mr Taylor.
He says the independence was established in legislation when Audit Scotland was set up, but it is also enshrined due to the culture of auditors.
Mr Taylor says that can develop as the SFC goes on.
Mark Taylor from Audit Scotland says no one is suggesting a blank cheque but there are questions over who is making resourcing decisions and that this is fundamentally important.
Image source, Audit Scotland