Even more tax rises inevitable, signals Mackay
THE tax gap between Scotland and the rest of the UK will grow further.
Finance Secretary Derek Mackay has said more ‘divergence’ on income tax rates is ‘inevitable’, adding he wants a more ‘progressive’ system.
He has already made Scotland the highest taxed part of the UK by forcing everyone earning more than £26,000 a year to pay more income tax than they would if they lived south of the Border.
In an interview with the Public Finance website, Mr Mackay said: ‘Our proposition on tax is to use the tax system in a fairer way but also deliver growth and investment in the economy.
‘The reason we are diverging is that we want to use our tax system in a more progressive fashion and, clearly, the UK Government does not.’
He said the Scottish Government’s desire for an ‘increasingly distinctive path’ on taxation would depend on the future decisions of the UK Government, adding: ‘But I suspect further divergence is inevitable.’
Since the start of April, more than a million Scots earning more than £26,000 a year have had to pay more income tax than people in other parts of the UK.
The changes created a major gap between the income tax rates for the first time since the Act of Union 311 years ago.
Anyone earning a £50,000 salary now pays £824 more in Scotland, rising to £1,074 on earnings of £75,000, £1,324 on a salary of £100,000 and £1,943 for someone on £150,000.
The basic 20p rate of tax – which has previously been paid on all taxable earnings up to £43,000 – now stops at £24,000, when a new 21p ‘intermediate’ rate begins.
This rises to 41p at £43,430, replacing the previous 40p rate, and up to 46p at £150,000, 1p in the pound higher than the previous system. In addition, a lower 19p rate applies on the first £2,000 of taxable earnings.
Scottish Tory finance spokesman Murdo Fraser said: ‘Not content at making Scotland the highest-taxed part of the UK, it seems the SNP now wants to go further. Its moves, which it seems to think are “progressive”, will drive away jobs and investment. If anything, Derek
‘Even further in the wrong direction’
Mackay should be looking to eliminate the divergence, not go even further in the wrong direction.
‘The SNP’s own independence blueprint has accepted that high taxes deter talented people from moving here, hence its call for tax breaks for immigrants. But it can’t seem to apply its own logic to those already living and working here.’
The UK Government plans to cut the tax bill for all British workers by raising the tax-free personal allowance from £11,850 to £12,500 by 2020.
It has promised to increase the threshold for paying the higher rate of income tax from £46,351 at present in other parts of the UK to £50,000 by 2020, which will lift thousands of people out of the higher rate entirely and cut the tax bill of those already paying it.
Thresholds for the rates are devolved. SNP ministers have only said they will peg any increases to ‘a maximum of inflation’.
The Scottish Chambers of Com- merce has warned that recruitment difficulties are growing for some firms, while Scotland’s economy is lagging behind the UK’s.
The Scottish Retail Consortium also has concerns about the impact of tax rises on consumer spending.
HOW the hearts of hard-working families will sink at Derek Mackay’s blithe assertion that further ‘divergence’ between Scotland’s income tax regime and that of the rest of the UK is likely. For ‘divergence’ means higher taxes here as Mr Mackay plunders still more from take-home pay.
Scots already pay the highest taxes in the UK under Mr Mackay’s ‘progressive’ regime – funny how the Finance Secretary who knew nothing of the key Laffer Curve is suddenly an expert in stealthy euphemisms.
As well as meaning hard work pays less here than it does in England, the SNP tax changes risk chasing the brightest and best away from Scotland, while creating headaches for business and investors.
It is incredible Mr Mackay has already made up his mind that taxes must rise further.