The financial services industry in Scotland, represented by Scottish Financial Enterprise (SFE), has raised concerns about the effectiveness of the Scottish Government’s tax policy. SFE has emphasized the need for the Scottish Government to address the divergence in tax rates between Scotland and the rest of the UK.
According to a recent report by the Institute for Fiscal Studies, Scotland’s top rate of income tax may have led to a slight reduction in revenues rather than an increase. This has prompted SFE to urge Finance Secretary Kate Forbes to consider aligning tax rates more closely with those in the rest of the UK in the upcoming Budget proposals on December 4.
Sandy Begbie, the Chief Executive of SFE, highlighted the risks associated with income tax divergence and the potential impact on the Scottish tax base. He emphasized the importance of evidence-based policymaking and the need for the Scottish Government to avoid further tax increases that could be counterproductive.
Begbie acknowledged that addressing tax policy divergence cannot happen overnight but suggested that even a partial alignment of income tax rates with the rest of the UK would be a positive step. This, he believes, would demonstrate the Scottish Government’s commitment to addressing the concerns of businesses and supporting growth, investment, and talent retention in Scotland.
In response to SFE’s concerns, a Scottish Government spokesman defended the current tax policies, stating that they are based on evidence and aim to balance revenue generation with the impact on taxpayers and the economy. The spokesman highlighted the growth of Scotland’s tax base, citing data showing faster earnings and tax per head growth in Scotland compared to the rest of the UK in recent years.
Overall, the debate surrounding Scottish income tax policy highlights the challenges of balancing revenue generation, economic impact, and alignment with the rest of the UK. It underscores the importance of evidence-based decision-making and the need for policies that support business growth and talent retention in Scotland. As the Scottish Government prepares to unveil its Budget proposals, the discussion on tax policy divergence is likely to continue as stakeholders seek a sustainable and effective approach to taxation in Scotland.
