A STRONG whiff of smoke and mirrors surrounds the “new” tax powers (your report, 26 June).
However, it is impertinent for David Mundell to ask the SNP “whether it will propose new tax rises ahead of next year’s Holyrood elections”. With respect, that has nothing to do with the availability of the powers, nor anything to do with Westminster – they should spell out what the powers are and leave Holyrood to use them or not.
Whatever powers over rates and bands of income tax are transferred, the assessed proceeds of the existing regime would have to be transferred too – and the block grant would be reduced accordingly. But how would the proceeds from any increase in tax rates, or proceeds from growth in employment, be handled? Would these represent additional revenue for use by Holyrood? Or would they, too, reduce the block grant? If so, there would be no available extra money. Would the same go for VAT?
The answer appears to be set out in Paragraph 78 of the Smith Report:” The Scottish Government will receive all Income Tax paid by Scottish taxpayers on their non-savings and non-dividend income with a corresponding adjustment in the block grant received from the UK government, in line with the funding principles set out in paragraph 95”.
It could not be otherwise; the English consider their taxpayers are subsidising us because we are not self-sufficient. Yet, here we are, increasing our tax-take to increase our spending, while their subsidy continues, and our per capita advantage is enhanced. They will be incandescent if they find we are getting away with it.
Mr Mundell seems anxious to emphasise, perhaps as a diversion, the opportunity we would have to increase tax to fund additional welfare payments, which are ordinarily reserved to Westminster, and, therefore, not covered by the block grant, so the tax proceeds for that would not come off it.
So, we could have some tax proceeds that are deductible from the block grant, and some that are not. How on earth is HMRC going to assess which category each bit of revenue belongs where? We need answers.
DOUGLAS R MAYER