Press release: Cautious approach to income tax changes in Wales welcomed

Commenting on today’s Welsh Assembly vote to approve the Welsh Budget for 2019/20, Ritchie Tout, Vice-chair of the CIOT’s Welsh Taxes Technical Committee, said:

“We welcome the sensible decision to avoid changing the income tax rates in Wales. It is best to let the system of identifying Welsh taxpayers settle in for at least a year before giving any cause for further confusion among taxpayers by changing rates or bands.

“Changes to the income tax structure for high earners or businesses carry a significant risk that decisions on where to locate will be based on tax. This is a threat to Wales with our long and well populated border with England. The potential consequences, if the tax rates are increased, could be a reduction in the tax base due to migration or a large dead weight cost with no guarantee that it will be offset by an increase in the tax base if the rates are reduced. The dilemma illustrates neatly the challenge that will face the Welsh Government in balancing the desire to use their tax-raising powers to invest in public services with seeking to protect the country’s revenue base.

“Today the Welsh Budget process looks primarily at expenditure whereas what will be needed in the future is a focus on the detailed technical issues and on revenue raising. This would be better dealt with in a Finance Bill process that scrutinises detailed technical changes. It would, in particular, provide an opportunity to make wider changes to the existing tax legislation than could be dealt with by regulations. A Finance Bill will be an opportunity to debate innovative new strategies for Wales.”

Notes for editors

  1. The Welsh Budget 2019/2020 was agreed after a debate and vote in the Welsh Assembly today (15 January 2019)
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