For the first time, taxpayers living in Scotland will next year be identified as Scottish on their tax code for the purpose of paying the Scottish Rate of Income Tax (SRIT).

It is something of a defining moment as it will be the closest this generation has come to being Scottish citizens.

For most of us there will be no choice as, if we live and work in this country, we will clearly be Scottish for SRIT purposes but, for a few who work and live between Scotland and south of the Border, there will be a set of rules to test on which side they fall. The tests are being worked out and I hear, although perhaps it is apocryphal, that more weight is being given to where you keep your dog than where you see your spouse!

What is a shame and definitely a missed opportunity is that the first thing new Scottish taxpayers are hearing is a debate on whether and by how much the SRIT is likely to go up. Finance Secretary John Swinney is being pressed on whether an increase is likely to happen and is leaving his options open. However, no party seems to be suggesting a lower rate.

For those who have not been following all the developments of new tax powers, the SRIT is the proposal put forward following the Calman Commission for more tax powers to be devolved. Under these proposals, the Scottish Government sets each year 10p of current income tax across all bands. It should not be confused with the proposals discussed in the Smith Commission which would give control to the Scottish Government on all income tax which will not be implemented until later.

Would it not be refreshing and more balanced if we had some discussion on how the 10p rate could be reduced? After all, it affects all income tax payers across all bands and hits rich and poor alike. In fact it hits lower rate tax payers proportionally harder than top rate payers, as a 2p increase in SRIT is a 10 per cent increase to a lower rate tax payer but only a five per cent increase for a 40 per cent higher rate tax payer and four per cent for a top rate taxpayer; hardly a progressive tax proposal from our politicians.

If we were to suggest a 2p decrease on tax, this would equate to an approximate fall of £700 million in income tax revenue for Scotland. This would give a clear sign that Scottish Government could do something different to grow the economy. It might persuade those who have a choice to opt to be Scottish taxpayers. The question then is how could an income tax reduction be funded?

Obviously, if Scotland had other tax powers it would have greater flexibility. However, it could fund the income tax reduction by giving back control over council tax to local government, releasing it from the council tax cap and allowing it to re-base the tax bands. Local government could then adjust council tax after a seven-year freeze and bring council t bands in line with increased house prices. Many bands are totally unrealistic, having not been adjusted since 1991 and houses that are worth many millions of pounds are paying council tax based on much lower values. The banding could also be adjusted to reflect more properly the differential between high end properties and those in economically disadvantaged areas. Those in the top band pay four times more council tax than homes in the lowest band but the houses in the top band are worth at least 10 times, and some more than 50 times, more than those in the lowest band.

One additional benefit of this approach is that it could provide the right timing to give council tax control back to local government, which is part of the trend to decentralise government. All political parties in Scotland have expressed the desire to give more responsibility to local government and giving them control over more of their finances to meet their expenditure would be a good start. Allowing more to be raised from council tax would allow the Scottish Government to reduce income tax, which should be a popular move particularly ahead of an election and also one that demonstrates to Westminster that we can take a different approach.

It would be good if being a Scottish income tax payer left a good taste in the mouth. It might make more people and businesses receptive to more fiscal powers being transferred, such as those proposed by the Smith Commission rather than a dread that Scotland will become a country of increased tax and spend.