Tax at SNP conference 2017

This is the last of a series of reports on tax policy discussions at the main party conferences. Summaries of the Lib Dem, Labour and Conservative party conferences can be found here.​

Scottish Rate of Income Tax (SRIT)

Finance Secretary Derek Mackay’s speech to delegates provided the clearest signs of how the party’s approach to devolved taxation – and in particular how its use of powers to set rates and bands of income tax – will evolve in the coming months.

While the Scottish Government would adopt a progressive approach to tax, the finance secretary said that it could only do so with the powers it has its disposal.

Mr Mackay reminded delegates that powers over the tax base, personal allowance and reliefs all remain reserved to the UK Government, with Scotland responsible for raising around one-third of its total income.

This, he said, was a situation which left the country with “one hand tied behind our back” and was a situation he would “never settle for”.

A discussion document on the future of Scottish income tax will shape thinking in advance of the Scottish Budget, with Mr Mackay pledging his party to a “progressive” approach to taxation.

The first minister, Nicola Sturgeon, had already confirmed the plans to MSPs in September, prompting speculation that income tax rises will be proposed when the Scottish Government’s draft budget is presented to the Scottish Parliament on 14 December.

Opposition parties have been invited to put forward their proposals on income tax to help inform the debate.  Mr Mackay welcomed the input of the Liberal Democrats and Greens but chided the Conservatives and Labour for thus far failing to engage. 

But Mr Mackay will no doubt have been seeking to dampen worries over tax increases when he told delegates that “taxation is not a toy”, adding that a “responsible” course would be needed when setting rates and bands for next year.

As a minority government, the SNP must secure the backing of at least one opposition party to pass its budget early in the new year.  With Labour, the Greens and Liberal Democrats all backing tax increases in some form and the Conservatives already critical of last year’s decision to freeze the 40p higher rate threshold at £43,000, something will have to give.

Land and property taxes on the agenda

Mr Mackay confirmed that the Scottish Land Commission would examine options for introducing a land value tax.  The announcement – which received a warm reception from delegates – is also likely to curry favour with the Scottish Greens, to whom the SNP may look for support in budget negotiations in both this and subsequent years.

Having already committed to taking forward the vast majority of recommendations contained in the Barclay Review of Business Rates published in late summer, the finance secretary said that the measures would make Scotland’s non-domestic rates regime “fairer and geared towards growth”.

The Scottish Government’s stamp duty replacement, Land and Buildings Transaction Tax (LBTT) was held up as yet another example of a fair and progressive approach tax.

Delegates will have been cheered by the news that LBTT has lifted “nearly 26,000 homes out of tax all together” while “asking those buying expensive or additional properties to pay a little more”.

But behind the scenes, Mr Mackay and his government officials will surely be analysing why the total amount of money collected from the tax in the last year was more than 10% less than originally forecast.

Air Departure Tax plans stuck in the departure lounge

For all the attention devoted in recent months to the Scottish Government’s replacement for Air Passenger Duty (APD), Air Departure Tax (ADT) was noticeable absent from both the main stage and fringe agendas.  Just last week, MSPs were warned of possible delays to the introduction of ADT, with the very real possibility of the tax being devolved and implemented in an identical fashion to APD. 

What next?

The real discussions on tax will begin this winter when the Scottish Government publishes its draft budget for 2018/19.

Minority government requires deals to be made with opposition politicians to pass the government’s budget and fund public services in the year ahead.

All signs point towards an agreement with one or more of the opposition parties in favour of tax hikes, with the Scottish Greens, at this stage, appearing the likeliest.

By Chris Young