Today the Scottish Parliament officially take on the so called significant new tax powers with the formal transfer of control from Westminster.
Scottish Finance Secretary Derek Mackay said: “We welcome these legislative steps which will increase the Scottish Parliament’s powers over income tax from next year. The new powers will allow us to design an approach to taxation which will suit Scotland’s needs, balancing the need to invest with the recognition that many households are facing difficult economic challenges. “As we set out earlier this year, our income tax proposals for 2017/18 will aim to protect lower-income taxpayers and generate extra revenue for us to invest in public services.”
Let’s be clear, this is a trap, it was a trap when it was agreed following the Smith Commission and remains a trap now. It is also not significant in any shape or form and means that the Scottish Government still only control around 30% of all tax raised in Scotland, 30%. This also means that 71% of all tax raised by the Scottish Government will be raised via income tax, this devolved income tax responsibility comes without the ability to set personal tax allowances which will remain at Westminster, it’s a trap. The Scottish Government will not control the definition of what income is, and neither will it apply to interest rates or dividends. As noted in the Smith Commission Report:
77. As part of this, there will be no restrictions on the thresholds or rates the Scottish Parliament can set. All other aspects of Income Tax will remain reserved to the UK Parliament, including the imposition of the annual charge to Income Tax, the personal allowance, the taxation of savings and dividend income, the ability to introduce and amend tax reliefs and the definition of income.
Irrespective of what the SNP say there is little room to improve Scotland’s finances with minor tax raising responsibilities, they are designed to force the SNP to raise the tax that people see being taken out of their pay packet while not allowing the raising of personal allowances to protect the lowest paid, as I said at the time if the SNP use this blunt instrument it will only end in tears.
The whole thing has been designed to force the SNP into a corner and should have been rejected outright. Nothing short of full fiscal autonomy is good enough as long as we are stuck in this awful United Kingdom that is less and less united every day. There was a lot of controversy when the Economist printed the photo below during the Independence Referendum, but you know what, I really believe that if we are stupid enough to fall into this tax trap and get suckered into using the responsibilities then the image will be all too real for many of us living in Scotland.
Just my opinion, I will always believe that the Scotland Act should have been rejected. Too little too late.