Cut tax for 'squeezed middle' to boost growth, say Tories

RADICAL plans to cut the income tax burden for thousands of working families in Scotland have been unveiled by a new independent report on the issue.

Iain McMillan chairs the Independent Commission for Competitive and Fair Taxation, who published the report

The proposals would see the creation of a new “middle” tax band of around 30 per cent which people would start paying with a salary of about £42,000 – the current 40 per cent rate.

The move has thrust Scottish tax rates to the centre of the Holyrood election campaign, which today enters its final 100 days.

Yesterday’s report was published by the Independent Commission for Competitive and Fair Taxation in Scotland which was set up by Tory leader Ruth Davidson to examine taxation as Scotland prepares to take sweeping control over income tax rates and bands next year.

Political opponents last night claimed the plans were aimed at helping “better off” Scots and “straight out of the 1980s”.

The report also calls for the land and buildings transactions tax on home-buying to be scrapped.

And the authors dismissed a proposed increase in the top rate of income tax for high earners, which Labour currently advocates and First Minister Nicola Sturgeon has previously backed.

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The new middle band of income tax between the current 20 per cent and 40 per cent bands, at around 30 per cent, would “ensure fewer aspirational families are dragged into the higher tax rate band”, the report said.

Commission chairman and former CBI Scotland director Sir Iain McMillan said: “The middle earners, there’s no doubt about it, their tax burden in recent times has not been improved, so we would do that.

“If it was implemented right now it would probably raise less tax, but over time, one would hope that the attractiveness of the tax rate and the incentive to work and earn more would actually result in more tax yield over time.”

Labour leader Kezia Dugdale has said her party would use an increase in the top rate to tackle the attainment gap in schools.

The SNP has said it is in favour of “progressive taxation”, with Ms Sturgeon backing restoration of the 50p top rate of tax during last year’s general election.

Sir Iain said: “Such a measure could drive out wealth creators and deter new ones from coming to Scotland.”

Instead, the report says the overall tax burden should not be any higher than in any other part of the United Kingdom – and lower when affordable.

The current council tax freeze should also be ended and the council tax itself replace with a new property-based tax system.

Although the commission was set up by Ms Davidson, its work was conducted independently of the party.

Sir Iain said Scotland has been “sheltered” from tough spending decisionsbut 
this will change next year when MSPs take full control over income tax rates and bands.

“From now on the debate in Scotland needs to include tax as well as matters concerned with spending,” he said.

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“I hope very much that this report will stimulate a rigorous debate on Scotland’s international competitiveness and the contribution that competitive and fair taxes can make to improving Scotland’s ­economy.”

It backs a freeze in business rates for the course of the next Scottish Parliament, to offset the 42 per cent increase in rates since 2007. The report concludes that the Scottish Government’s new Land and Buildings Transactions Tax is “unfair” and – over the longer term – should be abolished.

Ms Davidson said: “The commission’s central recommendation is that the tax burden should be no higher in Scotland than in the rest of the UK, and lower when affordable –and I back that 100 per cent.

“We need to show that Scotland is open for business, so I and my team will do everything we can to ensure that the SNP does not use the new tax powers to take more money from the pay packets of hardworking Scots.

“We will examine these proposals closely and come forward with our plans ahead of the election in May.”

But political opponents branded the plans “uncosted” proposals which will only benefit better off Scots.

SNP MSP Kenneth Gibson said: “These proposals are a series of uncosted set of tax cuts which largely benefit those on higher incomes and the biggest businesses – while starving public services of potentially billions of pounds of investment over the next few years.”

Labour’s public services and wealth creation spokeswoman Jackie Baillie said: “Ruth Davidson claims to be a new kind of Tory but this unfunded plan could have come straight out of the 1980s.

“With the SNP already planning half a billion pounds worth of cuts to local budgets for schools and childcare, these unfunded Tory plans will only pile on more cuts affecting our young people.”

Liberal Democrat leader Willie Rennie added: “The Tories haven’t really changed. They still favour tax cuts for the better-off no matter what the consequences.

“Their plans on spending will have a devastating effect on education, the NHS, the police and other public ­services.”