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Scotland\u2019s growing tax divergence from the rest of the UK is reaching a tipping point where it erodes the country\u2019s competitiveness, according to an accountancy body.<\/p>\n
Recent analysis from Tax Policy Associates shows that increases in Scotland\u2019s top rate of income tax may now be costing the country around \u00a322m of lost tax in its first year as higher earners find ways to avoid the top rate.<\/p>\n
The Institute of Chartered Accountants of Scotland (ICAS) describes this as\u00a0a warning that tax divergence could be\u00a0impacting\u00a0Scotland\u2019s competitiveness, investment\u00a0appeal\u00a0and\u00a0long-term tax base.\u00a0<\/p>\n
It says that data\u00a0suggesting Scotland\u2019s 48p top rate of income tax may have reduced rather than increased revenues underlines the need for policymakers to assess the behavioural effects of tax decisions.\u00a0<\/p>\n
ICAS chief executive Gail Boag said:\u00a0\u201cICAS\u00a0has long argued that the UK tax system is overly complex and that simplification is essential to improving compliance, reducing administrative burdens, and supporting business confidence.\u00a0<\/p>\n
\u201cWe have\u00a0warned for several years that Scotland could be approaching a tipping point, where growing tax divergence from the rest of the UK begins to influence decisions about where people choose to live, work and invest. <\/p>\n
\u201cAnalysis suggesting the 48p top rate may have raised less revenue than expected underlines why that warning matters. Scotland simply cannot afford to treat tax competitiveness as a secondary issue if it wants to protect its tax base and support economic growth.\u201d<\/p>\n
Ms Boag says while more evidence is needed before firm conclusions can be drawn, policymakers should not ignore signs that behavioural effects may be starting to\u00a0emerge.<\/p>\n
\u201cThese potential\u00a0behaviour\u00a0changes\u00a0include opting\u00a0against promotion,\u00a0reducing working hours, increasing potential\u00a0contributions, or\u00a0even\u00a0relocating\u00a0to other\u00a0parts of the UK.<\/p>\n
\u201cTax\u00a0policy\u00a0can\u2019t\u00a0therefore\u00a0be\u00a0viewed\u00a0solely as a means\u00a0of closing\u00a0short-term\u00a0budget gaps. It must form part of a\u00a0long-term\u00a0strategy\u00a0that supports\u00a0economic\u00a0growth, strengthens\u00a0competitiveness\u00a0and\u00a0ensures Scotland\u00a0remains\u00a0an attractive place\u00a0for people\u00a0to live, work and invest.\u201d<\/p>\n
Separate data from the Scottish Parliament Information Centre says Scotland raises the highest level of corporation tax per head outside of London. It shows businesses operating in Scotland raise on average \u00a31,405 for every person in the country.<\/p>\n
This is the highest rate in the UK excluding London and \u00a3105 per head higher than the South East England.\u00a0<\/p>\n
While the SNP claimed the figures underlined Scotland\u2019s potential as an independent nation, unionists will say that they show how Scotland is benefiting from being part of the UK, the so-called \u201cunion dividend\u201d.<\/p>\n
SNP MSP Patricia Gibson said:\u00a0\u201cThese figures underline the strength of Scotland\u2019s economy and the success of businesses operating across the country.<\/p>\n
\u201cScotland\u2019s businesses are creating jobs, driving investment and clearly generating significant tax revenues significant\u00a0tax\u00a0revenues to be reinvested in public services.<\/p>\n
\u201cWith the full powers of independence, including control over\u00a0corporation\u00a0tax\u00a0itself, Scotland could do even more to support private enterprise, attract investment and build a stronger, fairer economy that drives economic growth.\u201d <\/p>\n
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