Middle earner income tax band proposed

Holyrood entrance
By Michael McGlinchey, CA Today

26 January 2016

A Scottish Conservative-backed commission proposes a new income tax band for “squeezed middle earners”.

A new income tax band should be introduced to ease the pressure on “squeezed middle earners” in Scotland, a commission has proposed.

The recommendation was made in a report by a commission set up by the Scottish Conservatives to consider how new tax powers coming to the Scottish Parliament as a result of the Smith Commission on further devolution should be used.

The Commission for Competitive and Fair Taxation in Scotland proposed a new middle band of income tax between the current 20 per cent and 40 per cent bands, at about 30 per cent.

This should be introduced “when affordable” and would "ensure fewer aspirational families are dragged into the higher tax rate band" of 40%.

The commission said if Scotland is to remain competitive, its overall tax burden should be lower than that in the rest of the UK.

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.

Commission chair and former CBI Scotland director 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."

The commission comprised business leaders and economic experts, and also called on Scottish politicians not to raise the 45 per cent top rate of income tax.

Other recommendations included a freeze in business rates for the course of the next Scottish Parliament and the replacement of Air Passenger Duty with a new Departure Tax linked to travel distance.

Central recommendations

Scottish Conservative Leader Ruth 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.”

SNP MSP Kenneth Gibson said: "These proposals are a series of un-costed 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.”

Scottish Labour's public services spokeswoman Jackie Baillie said: "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."

Scottish Liberal Democrat leader Willie Rennie said: "The Tories haven't really changed. They still favour tax cuts for the better off, no matter what the consequences.”

The commission’s report was published with 100 days to go until the next Scottish Parliamentary Elections.

Topics

  • Tax
  • Political landscape
  • Business
  • Accountancy

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