Brian Monteith: Beware tax haven in Middlesbrough

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At last the coruscating, bleach-cleaning effect of fresh daylight is beginning to reveal the truth 
 about the choice Scotland faces about the tax rates we will begin to pay in the next five years.

I don’t often give my regards to Nicola Sturgeon – why should I for she stands for practically everything I oppose in regard to individual liberty, cultural identity and the power of the state? – but on this occasion I am willing to thank the First Minister for her semi-honesty. I offer her two generous cheers with my glass of Deuchars IPA raised in the air, and when the day comes that she really says what she means I will give her three cheers and uncork the Champagne.

It’s all very simple but it is also long overdue – the SNP is beginning at last to talk about how it will tax us when it (presumably) is re-elected next year. The reason I only give two cheers is because, politicians being politicians, Nicola has not been entirely honest with us just yet, but she offers the hope that she will be, in 2018. Here’s why.

The First Minister has announced that she would like what she calls a more “progressive” income tax system. By this she means that those that earn more money pay more tax. Now there are arguments for and against this. Personally, I favour a flat rate tax that treats everyone equally so that once they become liable for income tax (and the entry threshold can be set quite high) they have an incentive to work harder and earn more mullah because they are not penalised for being more productive. They would still pay the same proportion as everyone else – which is eminently fair and gives them that vital incentive. Taking more income from people who work harder reduces incentives and penalises us all, but most especially the poor.

But let’s leave my argument aside for another time. The point is that sweet Nicola has said income tax should be more “progressive” and by this she means that higher earners pay more tax as a proportion of their income on the assumed grounds (unsupported by evidence) that they can afford it. It also assumes they will stick around to pay it. Fair enough, but what does this mean in reality?

Chocolate-couldn’t-melt-in-her mouth Nicola says the problem is that she does not have the powers to introduce a progressive tax system through the Scottish Parliament, so she cannot do it just yet – but she intends to when the powers eventually arrive in 2018.

This is true. It is also true that Holyrood did once have these powers – because it was once possible to cut the rate of income tax by 3p, but as it would have only applied to the standard rate of tax it would have thus left the upper rates at progressively higher levels. Did you know that the SNP gave those powers up? That’s right, the SNP returned those powers to Westminster as the Scottish Government did not want to bear the cost of the administration it would take to introduce different tax rates (that was the excuse at the time, anyway). It’s not something progressive Nicola likes to talk about.

But we are now where we are. The powers that will be given to Holyrood by 2018 – which will be in the period of a Scottish Government elected next year – will allow Nicola to tax the top rate of taxpayers at, say, 50p or higher compared with the rest of the UK. The implication she is signalling is that she will do this, in comparison with the 45p UK upper tax rate that pertains at the moment.

But policies have consequences. There are only 14,000 taxpayers in Scotland that pay this rate – and many of them don’t even work in Scotland and are of course the most mobile of all of us. Why would or should the upper-rate tax base stay at 14,000 – is that a safe assumption for Nicola to make?

Tax problem, says the entrepreneur creating jobs and taxable wealth in our society? Just jump on a jet and head to Monaco, the Isle of Man or even Middlesbrough – they will all be tax havens in comparison to Motherwell. Middlesbrough a tax haven, who would have thought? But that’s what are called unintended consequences, and guess who pays?

The result will be that total tax revenues will fall – and so to ensure the same amount of money is collected the ordinary taxpayer, probably you, will in the end have to pay more. This is not progressive, it is regressive. It means that those least able to afford to pay must in time actually pay more. That’s why Nicola is only being part honest.

And what if George Osborne cuts the top rate to 40p? How many more will leave Scotland behind?

Nicola is selling a seductive policy without telling you of the consequences. It looks like a silver ring but it is very thin plate that will quickly tarnish, marking your skin. Thanks for the honesty, Nicola. At last we can see you are selling false wares, and, most sincerely, I truly thank you for that.