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As ministers seek support for Budget...

Business warns tax rise call sets ‘dangerous precedent’

A business leader has issued a warning ahead of the Scottish Budget debate over calls to raise income taxes in Scotland.

In a clear rebuke to Scottish Labour’s proposed increases and the SNPs’ plan not to impose a threshold increase, Liz Cameron, chief executive of the Scottish Chambers of Commerce, says such moves would set a “dangerous precedent” by hitting business competitiveness. 

Labour has proposed a 1p increase on the basic rate of income tax, raising the top rate to 50p, and the introduction of a tourist tax.

Deputy leader Alex Rowley, who is leading the party’s local election campaign wants to stop the Scottish Government imposing what it claims are £327 million of cuts to public services and argues that raising taxes would help drive economic activity.

The Scottish government does not intend to pass on the full rise in the threshold for 40p taxpayers as will be the case in the rest of the UK.

Talks were taking place between ministers and the Greens in a bid to get Finance Secretary Derek Mackay’s Budget plans through.

Greens co-leader Patrick Harvie is demanding extra cash for local councils, but could be ready to drop demands for tax hikes to 60p for high earners.


Latest news: Deal clinched with Greens – see business and political reaction here


The prospect of tax increases has alarmed the Scottish business community. In a statement ahead of Thursday’s debate, Ms Cameron (pictured below) said: “When the Scottish Government set out its Draft Budget in December, businesses were nervous about the dangerous precedent that would be set through plans to create a differential between income tax bandings north and south of the border.

Liz Cameron“Whilst these plans may seem modest in year one, the gap is set to widen over time, creating a further barrier to Scottish business competitiveness, threatening jobs, and damaging Scotland’s attractiveness to inward investors.

“Now there appears to be a possibility that Scotland’s politicians may consider even more punitive Scottish tax rises in order to secure the passage of the Budget Bill.  Such a move could prove to be highly dangerous at a time where Scotland’s economy is growing at a third of the rate of the UK as a whole

“Businesses are already faced with a business rates revaluation that will be hard felt in some of our key sectors and regions, and the new Apprenticeship Levy, due to hit larger businesses in April.  The last thing they need at this time of finely balanced challenge and opportunity is the prospect of even more tax rises.

“The Scottish Parliament has a new and enhanced position of responsibility in terms of tax in Scotland.  The sooner our politicians realise that supporting economic growth, rather than hiking up taxes, is the route towards increasing revenues and improving investment in key services, the quicker Scotland will prosper.”

David LonsdaleDirector of the Scottish Retail Consortium, David Lonsdale (right), said: “With customers already facing rising council tax bills and inflation, it’s vital they don’t face a further hit to their wallet or purse through an across the board rise in income tax rates.

“A 1p increase across the three existing income tax rates would take £475 million out of consumers’ pockets, equivalent to almost two percent of total retail sales in Scotland.

“The Finance Secretary has at least acknowledged our concerns about business rates by altering the threshold of the Large Business Rates Supplement.

“However 5,077 retail premises will continue to pay higher business rates than they would in comparable premises down south and many of those retailers are also set to begin forking out for the Apprenticeship Levy from April.

“These public policy costs are a significant burden to retailers and are difficult to absorb, and we hope this Budget will be the start of recognising and alleviating that burden on retailers.  

“Our politicians will rightly and robustly debate the detail of the Budget’s tax and spending plans. However, especially in the current economic climate, businesses are keen for some semblance of stability and certainty and we therefore hope a collegiate approach will ensure that a Budget can be passed in a timely fashion.”


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