ANALYSIS behind the SNP Government’s policy of freezing the top rate of income tax was produced in less than a week and was not based on new research.
Emails reveal one of the studies that the ministerial document drew on was a paper written by a former adviser to former US President George Bush’s administration.
Labour MSP Jackie Baillie said: “The First Minister gave the impression that extensive research had been conducted inside Government to justify freezing the top rate of tax. It now appears that was a fiction.”
First Minister Nicola Sturgeon went into the Holyrood election campaign in April facing questions about what her tax plans would be in the event of a victory.
Labour had promised to use the Parliament’s imminent control of income tax to back an increase in the top rate from 45p to 50p.
Ms Sturgeon had backed a 50p rate at last year’s General Election, but performed a U-turn days before the Holyrood campaign started.
On March 22, the Scottish Government published a paper claiming that a rise in the “additional” rate – covering income over £150,000 – could lead to a loss of revenue.
In an election debate that centred on tax, Ms Sturgeon explained: “I have got independent civil service analysis saying it might lose us £30 million.”
However, the thoroughness of the four-page document has been questioned.
According to the Government, civil servants were commissioned to carry out the work on March 17 – leaving five days between the project beginning and publication.
The exercise did not lead to any new research or economic modelling, but instead depended on historical work.
Internal civil service emails reveal ten existing papers, two of which related directly to Scotland, fed into the process.
One of the papers – “The Elasticity of Taxable Income during the 1990s” – was published six years ago and written by Seth Giertz, who now teaches at the University of Texas.
In 2005, Giertz served as a staff economist for President George W Bush’s Advisory Panel on Federal Tax Reform.
A 2012 paper by Her Majesty’s Revenues and Customs was also used as part of the review.
This document , which was in the public domain when the SNP backed a 50p tax policy ahead of the general election, helped the Tory Government justify a cut to the top rate:
“The conclusion that can be drawn from the Self Assessment data is therefore that the underlying yield from the [50p] rate is much lower than originally forecast (yielding around £1 billion or less), and that it is quite possible that it could be negative.”
Patrick Harvie, the Scottish Greens’ co-convener, said: “The SNP's reluctance to set progressive tax rates surprised many of their supporters, and if it was based on nothing more than old studies hastily cobbled together, it's really not defensible.
“The SNP doesn’t have a parliamentary majority and we are willing to work with them to create a fair tax policy which prevents Tory cuts and builds a more equal society. When budget time comes around, those will be our priorities.”
A Scottish Government spokesman said implications of different policy options had been considered “over many years” and the commission date for the analysis “does not reflect when the Scottish Government started thinking about its income tax policy”.
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