SCOTLAND’S TAX BURDEN: ARE WE REALLY OPEN FOR BUSINESS?

BILL JAMIESON               FEBRUARY 7 2017

A wee tax increase for the better off – why quibble? Higher rates for bigger retailers – who’s really hurt? Bigger rates bills for north-east hoteliers – it’s a small number.

Creep by creep, step by step, Scotland has become the stealth tax capital of the UK. Whether it is the higher rate tax threshold or the business rates levy, the Scottish government has ushered in the most anti-business tax regime while the economy flounders.

Taken separately, it may not seem that the separate increases in the tax take add up to much. But each one contributes to an increasingly hostile environment for business. And, with a few brave exceptions Scotland’s politicians seem impervious to the cumulative damage being inflicted.

Little wonder Scotland’s growth rate is lagging way behind that of the rest of the UK.

Last week’s lamentable Budget debate saw Holyrood lamenting ‘austerity’ (tough overall spending continues to rise) but forgetting the dying bird of Scotland’s economy. There was barely any mention of the concerns of the enterprise sector.

We single out three today:

ONE: THE HIGHEST TAXED PART OF THE UK

Hundreds of thousands of middle-class Scots will pay an extra £400 income tax this year compared to workers earning the same salary in England after the SNP’s Finance Minister Derek Mackay (pictured) announced a surprise extra raid.

He said the wage at which Scots start paying the 40p rate of income tax will be frozen at £43,000 in 2017/18 as part of a deal between the SNP and the hard-Left Scottish Greens to get his Budget passed.

Around 370,000 Scots currently liable for the higher rate will pay more than if they lived south of the Border, where the threshold is increasing to £45,000 in April. This includes an estimated 9,000 middle-class workers who will be dragged into paying the 40p rate when they get their pay rises at the start of the new tax year.

Scots could end up paying £1,400 more by 2020/21, when the higher rate threshold in England is expected to rise to £50,000.

Murdo Fraser, the Scottish Tories’ Shadow Finance Minister, lambasted the SNP for making Scotland the highest taxed part of the UK and said he “may as well have put up a sign at the Border that says ‘closed for business’.” In siding with the Greens the Nats had chosen the high-tax agenda of “the lentil-munching, sandal-wearing watermelons”.

Scottish Chambers of Commerce (SCC) chief executive Liz Cameron previously warned that higher taxation could harm growth. Creating a differential between income tax bandings north and south of the border “will set a dangerous precedent”.

TWO: HIGHER BUSINESS RATES SUPPLEMENT

The Large Business Rates Supplement rate of 2.6p in the pound (doubled last April) is now twice the rate applying in England (1.3p in the pound). Scots firms are set to stump up a total of £63 million more than their competitors or counterparts in England in the coming financial year.

Around 22,000 premises will pay the supplement in 2017-18 and it is expected to raise £125 million in 2016-17 and £126 million in 2017-18.

Scottish retailers will be paying over £12 million more in rates than they would if operating in England

Hotels some £2.4 million more

Pubs some £750,000 more

Industrial & manufacturing premises some £9.5 million more

Utility and energy companies (‘statutory undertakings’) some £12.6 million more

Says Scottish Retail Consortium Director David Lonsdale:

“The large firms’ rates supplement was doubled last year by Scottish Ministers with little regard to trading or economic conditions.. The current approach of attempting to pluck the goose with the minimum of hissing simply isn’t working. The only effect is to make life tougher for Scottish businesses – including 5,077 retail premises – many of whom are already grappling with a growing cumulative burden of government-imposed costs including the new apprenticeship levy and higher employer pension contributions.”

THREE: HIGHER RATES FOR NORTH EAST TOURIST SECTOR 

Protests are rising over the looming rises in business rates faced by hundreds of hotels and tourist businesses in the north east from April 1. Increases typically range between 30 per cent and 50 per cent, with some reaching as high as 190 per cent.

Protests over the higher levies following revaluations by rates assessors, are particularly marked in the north east of Scotland where the sharp downturn in the oil sector has brought a slump in business and bookings. And while many smaller firms elsewhere in Scotland will see a slight reduction in their rate bills, the overall revenue from business rates has soared 42 per cent since 2007-08 and will raise around £2.9 billion this year.

Marc Crothall, chief executive of the Scottish Tourism Alliance, has written to First Minister Nichola Sturgeon calling on her to intervene.

“Many of our members and others in the industry”, he wrote, “have and continue to express deep concern to us about the significant increase in business rates being notified to them by the assessors post recent revaluations due from April this year.

“We have been told by some if the rate hikes notified were to remain even for the short term pending appeal it could result in their being forced into business closure ; many have said that the rate increases they are facing will definitely restrict future recruitment and may require them having to let staff go.”

Scotland “open for business”? If only the Scottish government would allow it.

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  Comments: 1


  1. The SNP are driven by socialist dogma as their rationale for everything, and in the case of taxation this will backfire. Few of them – if any – understand business or even human nature, and they don’t want to because they think money grows on trees.
    Ireland in the 1970s was in the economic doldrums and they made a big recovery with two steps.
    Firstly they gave business 100% capital allowance on new plant and equipment within a year of its purchase.
    Secondly they attracted big earners in the arts and entertainment industry with a 20% flat rate of tax.
    But the SNP only see wealth as evil or morally wrong, so they are unable to embrace ideas like that.
    With regard to the further tax on hotels and pubs, they might just as well introduce prohibition, and be done with the licensed trade for good.

    Malcolm Parkin

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