Tuesday 12 April 2016

The SNP tax policy is a mess

Until just the other week the SNP was telling everyone how it wanted more powers to increase taxes on the wealthy. As from next year it will have those powers and it has begun to lip-flop over using them. The SNP really needs to count its lucky stars that the opposition parties are so appalling, otherwise this issue would threaten to take a big chunk out of their working class vote.

The line being put forward to avoid raising the top rate of tax to 50 per cent is basically that the rich would avoid paying it, either by leaving Scotland or using good accountants, so the government would actually collect less revenue than they do at present under the 45% rate.  Looking at that line, Old Uncle Ken can see some major flaws in the argument.

The first is that if the wealthy do leave the country then they lose all the goodies that Scotland gives them. It is not just the free prescriptions, it is also the frozen council tax, and free university education that their offspring enjoy. Looking ahead, the wealthy will gain from the government's pledge to reduce Air Passenger Duty by half in the new parliament, since it is the wealthy and their middle class hangers-on who fly the most. By way of contrast, your average Leither would probably count a day out at Edinburgh's Portobello as being about all he could afford.

In other words, and assuming that the wealthy are rational, then they will suck up the tax increase so that they can continue to enjoy all the other goodies that this government gives them. Goodies that would cost far more if they moved south of the River Tweed.

Those who do leave cannot take their jobs with them, so those positions will remain in Scotland. If you think about it, people earning over £150,000 a year must be in jobs that cannot be done via a perch in a tax haven like Monaco, otherwise the people doing those jobs would already be living in that country. So anyone who really does not want to pay the new rate, who can afford to move to a city like London and pay the house prices there, and who can find a new job in that city, will have to leave his old job in Scotland. Thus those vacancies would be filled by new people who are willing to pay the Scottish rates of income tax. 

The wealthy do not have the option of using creative accountancy to save their money, because the new powers that Holyrood will have relate only to earned income, and that is related directly to where people live. So Holyood has them by the balls. They either leave the country, or pay the higher rate of income tax.

If they try to play cute, then Her Majesty's Revenue and Customs has already said that it will cooperate with its new, Scottish counterpart to ensure that dodgy practices are dealt with firmly. So it is not just that rich men's balls are held, but that they can also be squeezed  by both governments acting in unison.

Taxation, of course, is about more than just revenue raising. It is about sending a signal  to the world at large about the type of country that is levying the taxes. The SNP has made a big issue over the past few years about how Scotland should be run more fairly than England because the Scots are naturally collectivist by temperament. Now they have a chance to put that rhetoric into action, and they are back-peddling furiously.

Labour, the Liberal-Democrats and the Greens have all pledged to raise taxes. As things stand the SNP are in bed with the Tories in their desire to hold them down.

The SNP needs to decide quickly if it really wants to have to start hearing again the old political charge that it is nothing but the party of Tartan Toryism.

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