Taking a closer look at the tax books

The proposals are the latest from the three Unionist parties to forestall independence. So each is spurning the Calman proposals on which they previously all stood shoulder to shoulder.

These included us taking responsibility for the one-half 10p of the standard rate and its proceeds of £4.15 billion (as in the Calman report), later assessed at £5bn, then, according to an earlier estimate from the OBR as £5.63bn.

However, its chairman Robert Chote now declares the figure for the first year of implementation (2016-17) will be £4.98bn, attributable to “the gloomy economic outlook that would bite into the transition to independence”.

All this juggling of the  figures may seem mundane, and of no consequence.

However, in the Calman proposals, the block grant under the Barnett formula would be reduced, at the budget stage, by the assessed income tax take for the year, so it is crucial to have accurate figures. Otherwise, the budget would not balance.

It is not clear what considerations Mr Chote took into account in his calculation, but it may be that the round of public expenditure cuts appeared in his equation.

It would be obvious to him that he should not count the loss of income tax payable by public sector workers, on one side, without also including the saving in public funds from their non-employment.

The pay saving would more than offset the tax loss. Paradoxically, these cuts would reduce Scotland’s finance provision to a more viable base, thus enhancing the ability of an independent Scotland to balance its books, and to assess the level of essential spending required to run adequate public services.

So I would not be too worried about the loss of tax revenue alone.

That scenario would also assist the status quo, in the event of a No vote.

Labour proposes that all income tax should be the responsibility of Holyrood, but that the Barnett formula should be kept in place – without the full range of tax measures, it would be possible only to increase the rate of income tax.

All of these proceeds would come off the block grant under Barnett. I  wonder whether Scottish Labour leader Johann Lamont thinks that would benefit Scotland, or be disadvantageous? And will her proposal be ready in time for 2016-17, and would Calman, therefore, fall by the wayside?

Douglas R Mayer

Thomson Crescent Currie

Midlothian

I noted with interest your article stating that Scotland is facing an “astonishing” £650 million fall in its expected income tax revenue in a single year – 2016-17 – according to the Office for Budget Responsibility (OBR), amounting to a 11.6 per cent reduction.

The initial £5.63 billion figure, estimated for first year of projected Scottish independence in 2016-17, was revised down to £4.98bn.

However, the facts seem to be getting in the way of  a good story and I would  recommend that those with an interest actually read the report.

Income tax in 2013-14 is forecast to be £4.2bn and by 2016-17 will be £4.98bn, an increase of £780m.

The OBR in 2012 forecast a bigger figure for 2016-17 and, therefore, like is not being compared with like as UK income tax projections have, of course, fallen as well.

By 2017-18 the OBR is forecasting income tax revenues of £5.3bn for Scotland, which is £1.1bn higher than the income tax for the current tax year.

Scotland, therefore, faces a £780m increase in income tax in the first year of independence, increasing to £1.1bn in the second year when compared with this financial year.

Alex Orr

Leamington Terrace

Edinburgh