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Pressure on Scottish budget

Mackay hints at tax change if divergence hits ‘turning point’

Derek Mackay and Tracy Black

Derek Mackay with Tracy Black: ‘not in a race to the bottom’ (pic: Terry Murden)

Finance and Economy Secretary Derek Mackay has hinted that he may have to adjust his income tax policy if Scotland is left at a disadvantage to the rest of the UK.

His tax regime, which has seen higher rate taxpayers denied an uplift in the threshold announced by the UK government, has been criticised as a deterrent to investment and top quality staff considering jobs in Scotland.

Mr Mackay told a business audience that it was not currently “putting anyone off” working in Scotland.

However, he admitted that the divergence in rates could reach a “turning point” and he was mindful of the statements by Prime Minister Boris Johnson to further slash income tax paid by higher earners south of the border.

Mr Johnson said soon after his election as leader that he intended to raise the 40p income tax threshold from £50,001 to £80,000. He also wants to raise the point at which people start paying National Insurance. In Scotland taxpayers pay 41p in the pound on earnings between £43,431 to £150,000.

Mr Mackay said: “If there is divergence because of the UK choosing to make decisions on tax for the best paid in society then clearly it is important for me and I will have to respond in a Scottish budget.”

Mr Mackay, who was answering questions at the launch of a new Scottish Productivity Index, declined to say if he would persuaded to make changes to taxes in the next Budget.

The CBI is among those organisations and businesses who have called into question the overall tax regime in Scotland, including the large premises business rates supplement and the car parking tax.

Tracy Black, director of CBI Scotland, told those attending the launch of the CBI/KPMG index that “ultimately we want people to be paid more.” Jenny Stewart, partner at KPMG, said Scotland needed “more people in high value jobs”.

Asked if his tax policy was consistent with the desire to boost productivity through incentives, Mr Mackay said his aim was to improve people’s quality of life and not participate in a “race to the bottom”.

Earlier he spoke of Scotland’s record of high employment, low unemployment and “progress over the period of devolution” through investment in skills and research.

He said this was at risk because of the UK’s imminent departure from the EU. “I am sorry to say that the tide may be turning because of the Brexit calamity,” he said.

See also

Call for investment in skills and wellbeing to boost output

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