Scotland’s political parties have been setting out how their approaches to tax and dropping hints on what we may see at the next Scottish Parliament elections in 18 months’ time.
With the latest opinion polls showing support for the party at around 40 per cent in Scotland, the Scottish National Party (SNP) have set their sights on holding the balance of power in the event of a hung parliament, with the Labour Party the likeliest suitors.
As such, the party’s Westminster manifesto presents a reflection of the party’s record as the governing party in Scotland (since 2007), its achievements as the third largest party in Westminster since 2015 and its aspiration to be Westminster power brokers after 12 December.
Unsurprisingly, the party’s manifesto has its demand for a second Scottish independence referendum front and centre. As the manifesto states, ‘the Scottish Parliament will have full control of tax and social security policy with independence’.
But the party has also presented a detailed set of tax proposals to be implemented, irrespective of any significant future constitutional changes.
Ending austerity and investing in public services (including personal taxation and VAT measures)
- The SNP will ‘demand’ the devolution of tax powers to ensure that Scotland’s tax system is fairer
- The party says that it has made Scotland’s income tax regime the ‘most progressive in the UK’. Its manifesto demands the devolution of National Insurance to the Scottish Parliament so that ‘rates and thresholds fit devolved income tax rates’. The SNP also says that devolution of NI will help employers seeking to create new jobs in Scotland
- The SNP will also help the majority with a freeze on National Insurance contributions and VAT
- SNP MPs will support reform of VAT and will guarantee the continuation of VAT-exemptions for items such as children’s clothes
- SNP MPs will also hold the UK government to a commitment to remove VAT from sanitary products
- Press the UK to keep pace with the EU and scrap VAT on e-books and e-journals
- The party will also support a freeze in Insurance Premium Tax ‘to ensure consumers aren’t penalised for taking steps to reduce risks’
The SNP says in its manifesto that it has ‘led the fight against tax avoidance at Westminster’, stating that this action included ‘a rare Finance Bill amendment forcing the UK to come clean on their ineffective anti-tax avoidance measures’.
Measures contained in the manifesto to ensure ‘that everyone pays the taxes they owe for the public services they enjoy’ include:
- A review of the closure of HMRC offices in Scotland and across the UK
- Reform of Companies House to uncover the beneficial ownership of Scottish Limited Partnerships, other companies and trusts
- Measures to improve the transparency of tax paid by international companies to ensure that they make a proportionate contribution to tax revenues
- Multilateral efforts to address tax challenges from the digitalisation of the economy
- Further action by the UK government to tackle international tax avoidance
- Full implementation of the 5th Anti-Money Laundering directive and a fit for purpose online retailer tax
- A review of the tax rules around intermediaries – known as the IR35 tax rule - and problems with implementation of the Loan Charge
- A comprehensive inquiry into the digitisation of tax, ‘to uncover the reasons for HMRC and UK Government delays that mean we still do not have the 21st century tax payments system that could help tackle avoidance and evasion’
An open modern economy (including business taxation)
- Back a reduction in employers National Insurance contributions [no amount is specified]
- Back an increase in the Employment Allowance from £3,000 per business per year to £6,000 per business per year
- Call on the UK government to examine a reduction in VAT for the hospitality sector
- Encourage reform of UK excise duty and a fairer tax for Scotch whisky [from the ‘A Sustainable Rural Economy section of the manifesto]
Better greener taxes
The party says that it will support substantial reforms to the UK tax system to support greener choices. It says that SNP MPs will campaign for:
- Tax incentives to enable people to make the switch to low-carbon heating systems more affordable
- The re-design of vehicle and tax incentives to support industry and business investment in zero emission and sustainable transport choices – such as reduced VAT on bicycles and additional incentives for businesses and individuals to use Ultra Low Emission Vehicles
- A reduction in VAT on energy efficiency improvements in homes, ending the Treasury’s 20% tax on making people’s homes warmer and greener
Other tax measures
- The party says that it will press to have the UK Government refund the £175 million that was paid in VAT by Scotland’s emergency services following the merger of Scotland’s police and fire services (both the SNP and Scottish Conservative manifestos compete for credit over which party’s MPs were able to secure tax relief for the forces)
- Continue to support tax incentives for creative industries, including for film and television, and for more work to increase equality, inclusion and diversity across the sector
- Call for an end to the two-child cap on tax credits
The SNP are not the only political party in Scotland to have published their own manifesto, with the others either showcasing the policies they are likely to pursue at the time of the next Scottish Parliament election in 2021 or highlighting how a Scottish bloc of MPs will stand up for the country’s interests as part of a larger grouping of MPs.
The Scottish Greens pledge to fight for more tax powers for the Scottish Parliament. The party supports measures proposed by the UK Greens to abolish tax breaks on buy-to-let properties and reduce VAT on repairs. The Scottish Greens also support:
- The introduction of a ‘wealth tax’ on the richest 1 per cent
- The introduction of a Land Value Tax as part of a reform of property taxation
- The Scottish Greens will also continue to oppose reductions in aviation taxes proposed by both the Scottish and UK Government, will ‘demand’ new taxes on aviation fuel and will end the freeze on fuel duty.
In addition to the measures proposed in the UK manifesto, the Scottish Labour Party provide hints on their future tax policies in the Scottish Parliament. Aside from the measures proposed by the UK party, Scottish Labour would:
- ‘Make the case’ for those who earn the most to pay ‘a little more’ income tax in the next Scottish Budget [the party has previously proposed that a new Scottish Income Tax rate of 50p for the very highest earners should be introduced]
- The party has also said it will make the case for replacing Council Tax with ‘a progressive alternative based on up to date valuations’
- Additional tax raising powers that it has proposed include giving councils the ability to tax land value. It also backs plans for tourist taxes [a power currently being consulted on by the Scottish Government].
The Scottish Conservative manifesto repeats the pledges made in the party’s UK-wide manifesto, with the party trumpeting what it says is the success of Scottish Conservative MPs in making the case for reviewing alcohol duty on the Scotch Whisky industry and protecting members of the armed forces based in Scotland from paying higher rates of devolved income tax. On this last point, the party has said that it will make this support permanent.
The Scottish Liberal Democrats also published their manifesto this week, with a commitment from the UK party to explore further fiscal devolution for the nations of the UK. The Scottish Liberal Democrats' key message heading into the final two weeks of the election campaign is that a vote for the party will be a vote to keep Scotland part of Europe and part of the UK.