TAXATION may be the gift that keeps on giving but, pressed too far, it can also start taking away. According to the Chartered Institute of Taxation (CIOT), this could be the consequence of Scotland having higher income tax than elsewhere in the UK. It points out that higher earners comprise 15 per cent of Scottish taxpayers but contribute 60 per cent of devolved income tax revenue. But, as the tax gap widens between Scotland and England, CIOT warns that many tax payers might avoid the higher bracket by limiting the hours they work or, if self-employed, might incorporate their businesses to pay lower corporation tax rather than income tax. The institute also says higher earners might even leave Scotland.
Finance Secretary Derek Mackay describes Scotland’s tax regime as “progressive”, raising revenue for public services and investment. And, given the UK Government’s policies, the notion of Scotland and England taking different directions is not necessarily a bad thing. Whether these are the first faltering steps in fulfilling the frequently expressed SNP desire to take Scotland fully in a Nordic direction – high taxes funding high spending – remains to be seen. Given the relatively low UK tax base from which is it seeking to depart, that remains some way off.
Meanwhile, in attempting to create the fair society it seeks, the Scottish Government is caught between the rock of policy and the hard place of taxation. Doubtless, sympathy will be limited in some quarters for “middle class Scotland” but at the very least they – indeed all of us – will need to see results, to know they’re getting bang for their taxed buck.
Taxation ever needs watching with a wary eye to ensure it doesn’t stymie ambition or willingness to work hard. It cannot be allowed to harm productivity, long-term revenue and, most importantly, the budgets of families just the wrong side of the threshold, who may already be struggling with their commitments.
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