The Scottish government has published a discussion paper to initiate debate about income tax policy ahead of the budget in December, with suggestions that it may be planning to make use of devolved powers to raise rates or change thresholds
First minister Nicola Sturgeon said: ‘Scotland now has a greater measure of fiscal control than at any time since the start of devolution.
‘By far the biggest fiscal lever we have is income tax - with 30% of Scotland’s budget now coming from income tax receipts. Of course, more than 60% of Scotland’s spending power is still dependent on decisions taken at Westminster.
‘With that greater ability to levy tax comes a corresponding duty to do so responsibly and in a balanced way. My government will always do exactly that.
‘But as the impact of austerity, Brexit and changing demographics bears down even harder, it is now time to ask ourselves some tough questions.
‘None of us want to see our cherished public services increasingly constrained in what they can deliver.
‘So with all the pressures we now face, we must consider if the time has come for those who earn the most to pay a modest amount more to enable us to do so.’
Income tax in Scotland should meet the ‘four tests’ to protect low earners, be progressive, proportionate to the ability to the pay and support the economy, Sturgeon said.
The paper sets out the powers the Scottish Parliament has over income tax, the contribution income tax makes to the budget, who pays tax and the benefits of taxation for individuals and businesses.
Finance secretary Derek Mackay has written to all parties inviting them to begin cross party discussions and will host two stakeholder roundtables later this month with business organisations, trade unions, civic society and tax professionals.
Mackay said: ‘I am seeking a well-informed and considered debate on the use of our powers, recognising that in a parliament of minorities common ground on tax must be found to secure a budget for Scotland. We have therefore set out alternative approaches for discussion, that we believe could better meet the four tests we have established.
The Scottish government’s tax and spending decisions for 2018/19 will be published in the draft budget on 14 December 2017.
The Scottish Parliament has the power to set rates and bands for non-savings, non-dividend income tax only.
The Role of Income Tax in Scotland’s Budget is here.
Report by Pat Sweet
