Retailers warn Holyrood over higher Scots income tax

Retailers are warning the Scottish Government against raising the rate of personal income tax above the rest of the UK. Picture: Andrew O'Brien
Retailers are warning the Scottish Government against raising the rate of personal income tax above the rest of the UK. Picture: Andrew O'Brien
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SCOTTISH retailers have warned Holyrood against “scaring off” potential new employers with any plans for a sharp ratchet up in personal income tax when First Minister Nicola Sturgeon shortly unveils her new government legislative programme.

The Scottish Retail Consortium (SRC) was also joined by the Scottish Property Federation (SPF) in cranking up the pressure this weekend ahead of MSPs ret­urning to the Scottish Parliament from their summer recess tomorrow.

David Lonsdale, director of the SRC, said “much greater certainty” was needed in the Holyrood legislative prog­ramme, which some MSPs believe will be unveiled as early as Tuesday, on how disposable incomes will be affected by eventual tax changes.

“Retailers have a strong interest in the amount of money in Scots’ pockets. The less money they have the less they can spend in shops and online,” Lonsdale said.

“What we don’t want, and don’t really expect at this initial stage anyway, is the new Scottish Rate of Income Tax (SRIT) to be higher than the UK rate. We would definitely not support that.”

The Scottish Property Federation also claimed inward investment could be damaged by any hike in Scottish income tax above the UK rate.

David Melhuish, director of the SPF, said: “Income tax here has got to be set so it does not scare off corporates from coming to Scotland. (Holyrood) needs to think about that. After all, there’s a big rival market for investment to the south if we do not remain competitive on areas like income tax.”

From April 2016 the main UK rates of income tax will be reduced by 10p for Scottish taxpayers and in its place the Scottish Parliament will be able to levy its own SRIT.

If it is set at 10p then income tax rates will be the same as in the rest of the UK. Under the new devolved powers, SRIT can be reduced to zero and there is no upper limit.

Lonsdale said Scottish retailers expected that the legislative programme will say that, initially at least, the Scottish income tax will be kept in line with the UK.

But he added that while that was “a reasonable assumption despite the debates about public spending” the danger was that any hike in future “could make it more expensive to attract managerial talent to Scotland to run stores or regional hubs etc. That is a real concern”.

Lonsdale added that the SRC was also pressing for greater clarity from Scottish Finance Secretary John Swinney later this year on what will happen when further income tax powers are devolved to Holyrood over the coming few years.

“Currently we have no strong sense of what will be the direction of travel [on Scottish income tax] when that happens,” the SRC chief said.

The wider Scottish business community has also urged the First Minister to undertake a thorough overhaul of the 
£2.8 billion business rates tax as a key priority in any legislative programme, claiming the tax is “inadequate” to the task of raising Scotland’s economic growth and productivity.

Campaigners for the business rates overhaul include the Scottish Chambers of Commerce, the Scotch Whisky Associat­ion, Scottish Engineering, Publishing Scotland and the Scottish Grocers’ Federation.

The SRC also singled out the continuing rise in planning fees, which went up another 5 per cent last November, as currently adding to the headwinds facing business.

“It’s another example of a perception that businesses can sustain increases in costs across the board. And it is happening at a time when Scottish retail sales are pretty flat,” Lonsdale said.