Business leaders urge Mackay to resist increasing income tax

Nearly 60% of firms say they don’t want the Scottish Government to change Income Tax rates, while almost two-thirds believe an increase would be detrimental to the economy.

This emerged today in a poll by the Federation of Small Businesses (FSB).

The group has written to Finance Secretary Derek Mackay with the survey results ahead of Thursday's Scottish Budget.

The study of 315 business owners shows 58.3% want Income Tax rates to stay the same, 20.7% would like tax rates to fall, while 21% want them to increase.

Asked about the consequence of an increase in Income Tax,  65% say it would be detrimental to the economy, while 18% thought it would give the economy a boost and 17% suggested it would have no impact.

Uncertainty

Andy Willox, FSB’s Scottish policy convener, said: “A clear majority of those that run their own business in Scotland don’t want the Finance Secretary to increase Income Tax rates. Those asked warned of the impact on the wider economy, and little wonder with pressure on household incomes and uncertainties about the impact of Brexit.”

Asked to choose between options outlined by the Scottish Government in relation to Income Tax, just under half of all business owners preferred a tax regime with the largest number of bands and rates.

Firm policy proposals on Income Tax are expected in this week's Scottish Budget.

In advance of this announcement, business groups have been ramping up the pressure on the Scottish Government not to hike Income Tax.

Just last week, the head of the Scottish Chambers of Commerce said raising Income Tax in Scotland could cause economic damage that will take years to fix.

Chambers president Tim Allan warned the country "cannot afford to be associated with higher taxes than elsewhere in the UK".

Last month, the Scottish Government announced the publication of a discussion paper examining the role of Income Tax in Scotland’s budget.

Open debate

The First Minister Nicola Sturgeon called on all political parties to engage in an open debate about tax in Scotland.

She said: “As the impact of austerity, Brexit and changing demographics bears down even harder, it is now time to ask ourselves some tough questions.

“None of us want to see our cherished public services increasingly constrained in what they can deliver.

“So, with all the pressures we now face, we must consider if the time has come for those who earn the most to pay a modest amount more to enable us to do so.”

Meanwhile, a new Bank of Scotland survey has found one in five homeowners wants to move within the next five years – but say they will face too many barriers. Instead, many are opting to renovate or extend their current property.

It is claimed that the Land and Buildings Transaction Tax (LBTT) has sent the cost of mid-price homes soaring in Scotland.

This tax is not paid until a purchase price exceeds £145,000. Between £145,000 and £250,000 the rate is 2%, and rises to 5% between £250,000 and £325,000. From £325,000 to £750,000 the rate is 10%, and jumps to 12% above £750,000.

LBTT has not been short of controversy – frequently hitting the headlines for all the wrong reasons.

It recently left the Scottish Government with a £54million hole in its budget. LBTT had been forecast to raise £538million in 2016-17, but only £483.6million was actually collected.