Tartan tax gap is threat to jobs, warn business chiefs ahead of Budget

BUSINESS bosses have delivered a stark warning to SNP ministers that widening the tax gap with the rest of the UK will deter highly skilled workers from moving to Scotland.

The Institute of Directors (IoD) said forcing hard-working Scots to pay significantly more income tax than those south of the Border will hamper recruitment.

The message from the powerful organisation, which represents 2,000 directors at firms employing more than 200,000 in Scotland, comes ahead of Finance Secretary Derek Mackay unveiling his Budget tomorrow.

If he fails to ease the tax burden on Scots at present paying the higher rate, someone on a £100,000 salary could be forced to hand over £2,184 more than someone on the same earnings based in England, Wales or Northern Ireland.

Highlighting the effect on recruitment, the IoD urged ministers to look at how they spend money before they decide to increase taxes further.

A wide range of business groups backed the IoD yesterday by pleading with ministers not to hammer Scots workers. Those on more than £26,000 a year already pay more if they are based in Scotland rather than England.

Chancellor Philip Hammond’s decision to increase the higher tax rate threshold to £50,000 in other parts of the UK will widen the gap in April unless the SNP Government makes a similar bold move.

Executive director of IoD Scotland David Watt said: ‘We are very concerned about any increase in business costs across the board at this point of time… If the Cabinet Secretary makes that worse it will be a big problem.

‘The number one thing for us is, please can politicians look at every penny they spend to make sure it is spent efficiently and effectively before they raise more money.

‘We don’t want increases in business costs, and that includes business rates. On individual taxation, we are really concerned that any further widening of the gap between Scotland and the rest of the UK will be a disadvantage to attracting people to Scotland.’

Mr Mackay has confirmed he will not match Mr Hammond’s decision on the higher rate threshold.

Those earning more than £43,430 in Scotland pay the higher rate, set at 41 per cent by the Government. If Mr Mackay leaves the threshold level unchanged, someone on £35,000 will pay £4,720 in Scotland from April compared to £4,500 in the rest of the UK.

Scottish Chambers of Commerce chief executive Liz Cameron said: ‘We are mindful of the challenge of recruitment, with many firms struggling to hire people with the right skills at the right time.

‘Providing stability and certainty on Scottish incomes tax rates is a clear step the Cabinet Secretary can take.’

David Lonsdale, director of the Scottish Retail Consortium, said: ‘Politicians ought to be wary about heaping yet more pressure onto family finances.’

CBI Scotland said further divergence between Scotland and the rest of the UK on income tax ‘could significantly dent Scotland’s ability to compete for talent and investment’.

A Scottish Government spokesman said: ‘The income tax changes we introduced in 2018-19 mean that more than two-thirds of taxpayers will pay less on their current income under Scotland’s new tax bands.

‘Low earners will be protected through the new starter rate of tax.’