Brian Monteith: Poor lookout as taxing times are upon us

Higher taxes for those who buy expensive houses and cars will drive them away, warns Brian Monteith

Here we go again. Another tax rise for a few justified as a tax cut for the many that will, in all likelihood, leave us all the poorer.

Thank you Scottish finance secretary John Swinney. You are nothing if not predictable, for in announcing your intended new property tax to replace stamp duty, you have done us the service of sending a clear signal, if one were still needed, of what to expect in the SNP’s brave new world free from Britain.

The new Scottish version of stamp duty will start at a higher value of property thus relieving more people from the tax, but this will be funded by increasing the rates on more expensive properties. Thus, an already progressive tax becomes ultra-progressive. This is justified by Swinney saying those who can afford to buy more expensive properties can afford to pay higher taxes, a glib assumption that is easy to make, but for which he has not a shred of evidence.

These same people also have the nous to buy just below the threshold of a higher rate and keep their money for the redecoration or a holiday in Spain, where of course they could alternatively find some attractive property bargains at the moment as these people are often highly mobile.

The stupidity of this belief in ever more progressive taxes can be illustrated in two ways. The first is to recognise that if such an approach is rational, it should be applied to more than just houses but also, say, to the second most expensive item we are ever likely to buy – our cars.

Cars over £30,000 could attract 22.5 per cent VAT, over £60,000 25 per cent, over £100,000 30 per cent and so on. Government ministers need not worry as they would be sitting in their voluptuous Volvos, courtesy of the taxpayer. The public might get the point though, and object, but it is the same daft principle.

The other example that bears repeating is that when presidents Coolidge Kennedy and Ronald Reagan and Prime Minister Thatcher cut higher tax rates, the revenues climbed considerably. When others raised them, the revenues fell. John Swinney, go figure.

The SNP is highly confused about tax and often talks of tax competition as if it is a one-way street: all Scotland needs to do is cut the marginal rate of a tax against our competitors, such as corporation tax, and wealth and riches will be ours as businesses and entrepreneurs fall over themselves in the rush to relocate to the capitalist haven that Scotland will become.

This conveniently forgets that our neighbours in Britain, far and away our largest export market, might also want to enter into a tax competition as well and cut some of theirs.

As has been argued by other commentators in this paper, business people don’t just take into account corporation tax, but others such as personal, capital gains, inheritance and property taxes, including duties and excises. Then there is the availability of employees with the right skills, the regulatory burden and the general ease of doing business. All of these things go into the mix before such strategic decisions are made.

That this is self-evidently true is illustrated by how few existing businesses actually relocate. Where low business taxes can have an impact is in the location or establishment of new businesses, but in a competitive market the attractiveness of Scotland will be open to challenge and the evidence that Scotland would be a high-tax, hostile environment is mounting – and it is all down to that man Swinney.

The SNP trumpets the rates discount that many small businesses now receive as if it was a generous tax cut, but it was nothing of the sort, for it was paid for by increasing the rates bills of larger businesses. It was not a tax cut at all but a realignment by making it more progressive – just what John Swinney proposes to do with stamp duty.

Business rates were the only tax that, until the passing of the new Scotland Act, our Holyrood parliament had complete control of and it is indicative of Swinney’s approach that he has never sought to slash it across the board and give all Scottish businesses a competitive advantage. If the rate poundage had been cut by just 2p for every year the SNP was in power, it would now be 10p lower, saving all businesses millions they could have invested in employment and capital equipment.

Indeed, Swinney’s anti-business approach is becoming as predictable as he is resistant to reason. When the recent business rates revaluation was applied, the usual transitional reliefs previous governments had introduced to allow companies time to adjust were ruled out in Scotland, while English businesses continued to enjoy what suddenly became an advantage.

Now we have the unedifying spectacle of vacant commercial properties in Scotland becoming subject to ninety per cent of their rates liability when previously they were granted 50 per cent relief, while in England a similar proposal was quietly dropped when businesses argued that without tenants to pay rents, they would go bust.

Tory MSP Margaret Mitchell has cited the example of Maxim Park in Lanarkshire, opened to a great fanfare by Alex Salmond in 2009 but with only 5 per cent let and a huge rates bill. If this is a good business-friendly approach, I shudder to think what Salmond and Swinney would be like on a bad day.

If we look at the SNP approach to personal taxes, the evidence is also less than reassuring. When elected in 2007, the SNP made great claims for their planned local income tax but, without a majority, it had to be shelved. Instead, the council tax freeze that killed local government accountability overnight was introduced. Popular with an electorate that does not want to feel the real cost of local services, the SNP cannot dare risk ending the freeze before the referendum: the policy has become to big to fail.

Local income tax has become the forgotten tax but, waiting to be resurrected, its odorous corpse is still there, making Swinney uncomfortable and embarrassed when anyone cares to ask: what’s that smell? It is just another tax to soak the Scottish rich that John Swinney hopes to introduce, ensuring that old road to London will become the route for anyone with ambition and aspirations.

• Brian Monteith is policy director of ThinkScotland.org