Scottish independence: Would taxes be higher?

Protesters march in Edinburgh against the bedroom tax. Picture: Ian Rutherford

According to the Scottish Government, in an independent Scotland taxes will be set as part of the government’s annual budgets. With independence all parties in Scotland will need to set out their approach to taxes ahead of the 2016 election.

Independence supporters say Scotland has paid more in taxes per head in each of the last 30 years than across the UK as a whole, and in the last year Scotland contributed 9.9 per cent of UK revenues and received only 9.3 per cent of UK spending in return, meaning Scotland can more than afford to be independent based on the revenues already paid.

Earlier this year Finance Secretary John Swinney said he does not see personal taxation (e.g. income tax/national insurance) rising following independence. He also said there would be no rise in oil industry taxation.

Whatever the complexion of Scotland’s Government after independence, indy supporters argue that a major gain will be that the Scottish people will get the government, and tax policies, they vote for. Independence supporters point out that under the Westminster system top rate tax was reduced whilst at the same time welfare cuts were imposed on Scotland despite the fact that nine out of ten Scottish MPs voted against those measures.

The Scottish Government claims that with the limited tax powers Scotland already has, it has ensured the most competitive business tax regime in the UK, frozen the council tax to lift the burden from hard pressed households and are replacing unfair stamp duty with a more proportionate system that could see the majority of house buyers pay less.

With a wider range of tax powers the Scottish Government claims it can support jobs and investment through the use of corporation tax, end the crippling effect on tourism and business sectors from air passenger duty and develop a fairer system of taxation that is easier to pay and that better connects tax and welfare. Alex Salmond has also pledged that Corporation Tax would be cut by three per cent on whatever level is planned by the rest of the UK.

The No side, however, claim that the SNP have promised Scandinavian style public services with American-style low taxation. Better Together say this contradiction of low taxes with high public spending isn’t credible.

Those who want the UK to remain together have also made much of the SNP’s own economic adviser, Joseph Stiglitz’s view that cutting corporation tax doesn’t lead to more jobs or economic growth and therefore more revenue. Better Together question how the gap in the public accounts left by the cut in corporation tax would be filled.

Needless-to-say, Better Together’s economic analysis differs from that of the SNP. The No side has made much of research by the Institute for Fiscal Studies (IFS), which has estimated that public spending per head of the population in Scotland is almost £1,200 higher than in the UK as a whole.

Better Together believe the SNP must explain how that gap will be filled – will it be through cutting public services or raising taxes?