THE Scottish Government and the Scottish Green Party have concluded a Budget deal this year, which comes at the expense of increasing the Scottish tax burden still further. It may be early days for the Scottish Parliament’s extended range of tax responsibilities but so far our politicians seem to be thinking a little two-dimensionally when it comes to their new powers.
Since April last year, Scotland has had the highest rate of tax on business rates in the UK and that will continue this year. While the Scottish Government continually cites its Small Business Bonus Scheme as an example of a tax break for business, in fact it serves as a reminder that the full burden of contributing over £2.6 billion in business rates revenues now falls on only half of Scotland’s non-domestic properties.
Meanwhile in this year’s Budget, the lower threshold for higher rate tax has been frozen in Scotland at a time when it is being raised elsewhere in the UK, with the result that, from April, Scotland’s higher rate taxpayers will pay £400 a year more tax than they would do if they lived in England, Wales or Northern Ireland. Now that may not seem a huge amount this year, but the gap will grow as the years go on, potentially resulting in a differential of £1,400 per year by 2020, if the policy of freezing the threshold was maintained.
While this is bad news for individual higher rate taxpayers, my primary concern is the message this will send out in terms of Scotland’s reputation as a place which values ambition and welcomes business. Investors are making daily decisions about where and when to fund developments across the UK; and Scotland is now becoming seen as a riskier option.
Higher rates bills and higher personal taxes for key decision makers in organisations will do nothing to attract businesses to Scotland and could, in time, drive away investment.
Ironically, it is not even the best way of achieving what the Scottish Government is seeking to deliver; that is, higher levels of spending on public services. More businesses, employing more people in high quality jobs, and all paying fair taxes is Scotland’s most sustainable solution. It is growing the Scottish economy, not squeezing the last drops out of existing businesses, that will generate more tax revenues. Increasing tax rates beyond that of our neighbours could well deliver the opposite result.
Liz Cameron is the chief executive of Scottish Chambers of Commerce
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