Business expecting tax ris
Sturgeon ‘softening ground for income tax rise’
Nicola Sturgeon: FSB says she is softening the ground for an income tax rise (pic: Terry Murden)
First Minister Nicola Sturgeon has dropped strong hints that the Scottish government will raise income tax in next month’s Budget.
In a discussion paper issued today she makes it clear that the government is facing some “tough questions” as it prepares its tax and spending plans for the year.
Commenting as the paper was published today she says no firm proposals have been made but “as the impact of austerity, Brexit and changing demographics bears down even harder, it is now time to ask ourselves some tough questions.
“None of us want to see our cherished public services increasingly constrained in what they can deliver.
“So with all the pressures we now face, we must consider if the time has come for those who earn the most to pay a modest amount more to enable us to do so.”
The prospect of a rise in personal taxation has alarmed the business community which is warning of the negative impact of a squeeze on household budgets.
Andy Willox, the Federation of Small Businesses (FSB), Scottish policy convenor, said: “The First Minister said today that no decision on income tax has been made. But it seems obvious that her administration is softening the ground for an increase.
“We shouldn’t implement tax rates which undermine the wider Scottish economy. With domestic spending power already under pressure, is this the time to take more from household budgets? Are we squeezing every drop of value out of existing public spending? With firms already facing turbulent market conditions, is it sensible to introduce even more change?
“FSB will be making the case for a Scottish tax system which works for smaller firms and the self-employed. We’re as yet unconvinced that taking more through income tax is the right move for the country.”
Ms Sturgeon states that income tax “should protect low earners, be progressive, proportionate to the ability to the pay and support the economy.
“As a Government, we will not propose alterations to income tax rates lightly.
“But after rigorous, careful and considered discussion, we will bring forward policy proposals that we consider to be in the interests of the country as a whole.”
Finance Secretary Derek Mackay has today written to all parties inviting them to begin cross party discussions and will host two stakeholder round tables later this month with business organisations, trade unions, civic society and tax professionals.
He said the aim is to hold discussions in an “open-minded and constructive manner”.
Tax and spending decisions for 2018/19 will be published in the Draft Budget on 14th December 2017.
The Scottish Parliament has the power to set rates and bands for non-savings, non-dividend income tax only. Around 30% of Scotland’s budget comes from income tax receipts. Scotland’s overall tax as a proportion of GDP is below the OECD average.
Scottish Labour leadership candidate Anas Sarwar said: “Nicola Sturgeon has followed the Tories’ tax agenda for years and is only now being forced to consider progressive taxation under pressure from Labour.
“I welcome this conversion from the First Minister and hope that in 2018 we can finally put a stop to SNP cuts that have already cost local services £1.5billion since 2011.
“During this leadership contest I am the only candidate who has put forward a detailed, redistributive income tax proposal that would deliver tax cuts for everyone earning £28,000 or less and tax rises for the richest few.”
Mr Sarwar’s proposals would make full use of the Scottish Parliament’s powers, raising an estimated £700million, with bands set at the following rates and salaries:
• 0 to £11,800 (the tax-free personal allowance, based on OBR projection)
• 15p from £11,801 to £18,000
• 23p from £18,001 to £42,385
• 43p from £42,386 to £100,000
• 50p from £100,001 upwards
Under the proposal:
• Every worker earning below the average wage of £28,000-a-year would pay less income tax than they do today.
• Workers on the Real Living Wage would receive a huge tax cut of £235-a-year.
• A nurse on the starting salary would receive a tax cut of £177-a-year.
• Everybody earning below £36,600-a-year would pay less income tax than under Scottish Labour’s existing policy.
• A new 50p top rate of income tax would be introduced for the top 2 per cent of workers – those earning £100,000-a-year or more.