‘Higher tax will drive out talent’ Scots parties are warned

Scotland's main parties have been warned an increase in income tax would drive talent out of the country. Picture: John Devlin

Scotland's main parties have been warned an increase in income tax would drive talent out of the country. Picture: John Devlin

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Raising personal taxes in Scotland above the level of elsewhere in the UK will drive out talent and deter investment, the Scottish Chambers of Commerce has claimed.

The warning was issued during an election campaign which has seen the SNP, Labour and the Lib Dems outline economic policies that will see Scottish taxpayers pay more per head than south of the Border.

It was made by Scottish Chambers of Commerce chief executive Liz Cameron as she announced the organisation’s “Sustaining Growth, Supporting Business” campaign, which sets out its priorities for the next five years.

Among the proposals recommended by the campaign was to fundamentally review business rates to reduce the overall cost to business.

It called for an assessment of the Stamp Duty replacement Land and Buildings Transaction Tax (LBTT) to ensure that the residential property market remains competitive.

Ms Cameron also suggested the Scottish Government should work with the UK Government to reduce tourism VAT to 5 per cent. She said the new tax powers coming to Holyrood meant that politicians had to think differently about the best way to attract and encourage business.

“The Scottish Parliament is 17 years old. It is now an established institution in Scottish life and in the Scottish economy but over the next few years it will progress its transformation from a body charged with spending taxpayers’ money in Scotland to one which is responsible and accountable for raising a large part of that money too,” Ms Cameron said.

“That transformation will require a different mind-set from our politicians – one which understands the need to balance what is desirable with what is achievable in a way that our devolved parliament has never done before.

“In terms of the Scottish economy, the parliament will now have more powers to help make us the most competitive and attractive region of the UK in which to do business. The starting point should be to ensure that our rates of personal taxation are at least as competitive in Scotland as in any other part of the UK – if it isn’t, it could drive valuable talent away from Scotland and act as a barrier to attracting new investment in our economy.

“We must also recognise that our Business Rates regime is becoming less competitive than other parts of the UK, particularly for medium and large businesses. We welcome plans to reform the rates system in Scotland but this must be considered alongside the range of other business taxes and the end result must be to deliver a system that is fair and efficient.

“The Scottish Parliament must also flex its muscles with the Treasury and seek new solutions on taxes which remain reserved. For example, our tourism industry should benefit from a lower rate of VAT, just like their competitors in 25 other EU nations currently enjoy. The Scottish Parliament is coming of age and must act responsibly in the interests of our economy.”

Tax has emerged as the main battleground in the run up to the 5 May Scottish election.

Nicola Sturgeon’s SNP has decided against offering Scots the full tax break to higher earners, a decision that will see taxpayers north of the Border continue to pay the 40 pence rate when they earn over £42,385.

South of the Border higher earning taxpayers will pay less tax when the Chancellor raises the 40 pence threshold to £45,000 - a change that Ms Sturgeon has said will not be passed on at Holyrood.

Labour has pledged an extra penny on income tax across all bands to pay for an improved education system.

The Lib Dems have advocated a similar approach to Labour. The Conservatives, however, are promoting an economic policy based on the principle that Scottish taxpayers should not pay more than their counterparts elsewhere in the UK.

Last night a SNP spokesman said: “The new tax and welfare powers mean this is the most important Holyrood election yet – and only a re-elected SNP government has the experience, initiative and vision to get the most out of those new powers.

“Our income and local tax plans are fair and responsible, we will continue our Small Business Bonus which has already saved firms around 
£1 billion – and we have already shown we can stand up to the Treasury, saving Scotland 
£7 billion in the process.”

A Labour spokesman said: “Education faces hundreds of millions of pounds of cuts in the next five years. That’s why faced with the choice between using the powers of the Scottish Parliament to invest in education and our economy or carrying on the cuts, Labour would use the powers to stop the cuts.”

Tory finance spokesman Murdo Fraser said: “We welcome this campaign. The Scottish Conservatives support the need for competitive tax rates across the UK.”

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