As I See It

Tax battle requires a robust constitution

Terry smiling 4On the face of it, there seems little not to like, and some things to see as inevitable, in the list of recommendations proposed by Sir Iain McMillan’s tax commission. An income tax ‘cut’ and abolition of a number of ‘unfair’ levies looks like a vote winning formula. If only it were that simple.

The report from the Independent Commission for Competitive and Fair Taxation is a complex 50-page document, full of charts and economic analysis, but it falls short in at least a couple of key areas.

A simple de-coding presents the country’s policymakers with a handful of main proposals which are aimed at lowering the tax burden on the individual, unfreezing council taxes, abolishing the recently-introduced replacement for stamp duty and creating a more progressive alternative to air passenger duty, the tax paid by travellers.

It argues that raising tax reduces the overall tax take, and vice versa. In other words, lowering it would encourage more activity which it turn generates more tax. So far so good.

The most eye-catching is the 30% income tax band, designed to ease the transition to the higher 40% rate as aspirant workers see their salaries jump. Sir Iain, who chaired the commission, says this would reduce income tax for thousands of middle-earning workers.

However, he could not quantify this claim and said it would depend on various circumstances. Why didn’t the report produce hypothetical examples based, for instance, on current circumstances? This is a worrying omission.

The commission’s biggest problem is that, despite being independent it was instigated by Scottish Conservative leader Ruth Davidson. Sir Iain was at pains at the launch on Monday to stress its independence, even confirming that the commission members worked for nothing and that the secretary provided by the Tories to handle the admin was working for the commission, and not the other way around.

Sir Iain admitted he had briefed only Ms Davidson on the report’s contents, but said this was done as “a courtesy”, given that it was her idea. He said he would be briefing the other parties.

But what, realistically, are his chances of persuading any of the other leaders to adopt a policy paper which, despite his assurances, will be seen as a Tory document?

Already the Lib-Dems have said they will be proposing their own ideas on taxation. Labour is most unlikely to cosy up to anything the Tories propose, particularly if Jeremy Corbyn has any say in the matter.

John Swinney delivers BudgetThe biggest obstacle is John Swinney (right), the Deputy First Minister and Finance Secretary, whose job is to determine tax and spend policies and who will be responsible for setting new tax levels.

Already he has rejected some of the commission’s findings and recommendations. He told me today that there was no prospect of abolishing the Land and Buildings Transaction Tax, as the report demands. Nor does he accept its claims – and similar claims made by property experts – that it is failing to produce the revenues expected.

“That is not correct. The revenue estimates will be exceeded,” he insisted.

He has also shown a determination to stick to the council tax freeze, telling members of Cosla today that he believes the government is doing all it can to protect council tax payers and services. In a statement issued after talks with Cosla, he said:

“We recognise that there are pressures on budgets being felt across the whole of the public sector, as well as in households throughout Scotland. That’s why it is important to maintain the council tax freeze while we consider ways to replace it – as well as reimbursing local authorities to ensure they can continue to provide essential services.

“Contrary to what has been claimed, recent independent research suggested that the Scottish Government has over-funded the council tax freeze, and that between 2008-09 and 2013-14 councils received £164.9m more than they would have by simply increasing council tax by Retail Price Index.”

Sir Iain McMillan fought some bruising battles during his time as director of CBI Scotland, none more so than with the SNP-led government. Those were mainly over the constitution. This time the fight is over tax.

But arguing with politicians who are equally determined to prove their own case promises, at best, to yield only small victories. It will require a campaign that wins the hearts and minds of the voters – convincing them that the numbers add up in their favour, and then pressuring the policymakers for change.

Only by doing that can the commission hope to ensure this report is not left with many others to gather dust on a shelf in Scottish Conservative party head office.

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