ICAS: Scottish Budget fails to drive sustained economic growth
Commenting on today’s Scottish Budget, the Institute of Chartered Accountants of Scotland (ICAS) said that the budget is short sighted and fails to deliver economic growth for Scotland.
Bruce Cartwright CA, Chief Executive at ICAS, said: “The Scottish government’s budget is both short sighted and fails to drive sustained economic growth. We continue to call for a five-year roadmap for growing the economy which would also give Scottish businesses some reassurance and stability – something we know they want to see.
“Implementing further tax increases on higher earners is not a long-term sustainable solution and will have a negative impact on positioning Scotland as an attractive place to live and do business. Scotland already has five of the highest tax bands in the UK, and these changes will impact the growth of the Scottish economy, while only covering 5.4% of the budget deficit.
“Additional tax bands introduce more complexity into an already overcomplicated tax system. We have called for tax simplification for many years to make it easier for taxpayers to understand and engage with the system. A complex tax system drives up costs for both taxpayers and businesses, and we urge devolved governments to work closely with the UK government when designing devolved or new taxes to make sure that tax is kept as streamlined and simple as possible.
“Today's budget announcement reveals that anyone earning more than £28,867 will pay more income tax then their UK counterparts. Aside from the new advanced tax rate and the increase in the additional rate, today’s announcement has also not improved the tax burden on so-called 'middle earners'. The freezing of income tax thresholds at the Higher Rate and above will result in more employees being brought into those tax bands when they receive pay rises. After last month’s Autumn Statement, employees living in Scotland earning between £43,663 and £50,270 will still be asked to pay an effective tax rate of 52%, including National Insurance. This is 22% higher than employees living elsewhere in the UK on equivalent salaries. It’s possible that individuals with multiple job offers who may be deciding on where to locate in the UK will take account of the new tax rates before making a final decision on where to be based.
“We’re disappointed to note that no announcements have been made in relation to extensions to the tax reliefs for a further five years in the two Scottish Green Freeports, which was announced in the UK Autumn Statement in relation to English Freeports. If the Scottish government had opted to replicate the tax reliefs currently in place across the rest of the UK, the potential for growth would have been significantly higher.
“ICAS has been advocating for a long-term business plan for Scotland for a considerable time and we were dismayed to see that we have another year of only planning one year ahead.”