Scots small businesses oppose income tax increase in budget

Most small businesses in Scotland are opposed to an increase in income tax and believe it will harm the economy, a survey has found, adding to pressure on the SNP ahead of the budget this week.

Finance Secretary Derek Mackay

With the Finance Secretary Derek Mackay widely tipped to raise taxes when he delivers his budget statement on Thursday, the Federation of Small Businesses (FSB) found that just 21 per cent of owners back an increase.

It came as the co-convener of the Scottish Greens, whose support will be crucial for the minority SNP government to pass its budget, signalled that the party would not vote for a financial plan that doesn’t include tax rises.

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Patrick Harvie said it was “clear that there’s a growing consensus for a more progressive system of income tax”. Mr Mackay is expected to announce tax rises after Nicola Sturgeon said the time was right to consider “modest” increases to fund public services.

The FSB polled 315 businesses in Scotland in November to gauge support for tax hikes. 58.3 per cent of those polled by FSB said they wanted income tax rates to stay the same, with 20.7 per cent backing a decrease and 21.0 per cent supporting a rise.

65 per cent said an increase in income tax would be detrimental to the economy, compared to 18 per cent who thought it would be a boost and 17 per cent who suggested it would have no impact.

Scottish Conservative finance spokesman Murdo Fraser said: “There is now a serious consensus within Scotland’s business community that the SNP should not increase income tax.

“The Nationalists must listen to this, or else workers will be hit in the pocket and the broader economy damaged.”

FSB Scottish policy convenor Andy Willox said: “A clear majority of those that run their own business in Scotland don’t want the Finance Secretary to increase income tax rates.

“Those asked warned of the impact on the wider economy, and little wonder with pressure on household incomes and uncertainties about the impact of Brexit.”

The First Minister has set out four options indicating that those earning more than £31,000 could be in line to pay more.

The government’s four alternative approaches include having anything up to six tax bands, while three out of the four feature a 50p additional rate and incremental changes to the basic and higher rates.

The FSB survey found that just under half of business owners preferred the proposal with the largest number of bands and rates, around a third wanted rates hiked for high earners.