The Treasury and the Scottish government are in dispute over the likely impact on taxation in the country if the referendum on Scottish independence receives a ‘yes’ vote next year report Harris & Co accountants Northampton.
Scotland’s First Minister, Alex Salmond, said that if Scotland does split from the rest of the UK each Scot would be £600 better off. However, the Treasury is disputing this with claims that independence would cost the average Scot £1,000 in tax, unless there are immediate cuts in public spending by £3bn more than the UK government plans by 2021.
Treasury officials calculate that Scotland"s economy would need to grow 2% faster than the UK"s to make up for a steep decline in North Sea oil revenues, an ageing population and its share of UK debt to repay. This would require a doubling of Scotland"s historic rate of growth.
For its part, the Scottish government says if Scotland gains independence there will be no immediate need to raise taxation to pay for current levels of spending, but it is committed to overhauling the tax system to create a ‘clear and simple’ approach.
The 670 page blueprint for what will happen, Scotland’s Future: your guide to an independent Scotland states that: ‘Detailed policies on tax and spending will be set out in party manifestos for the 2016 election and thereafter in the first budget in an independent Scotland. There is no requirement to increase taxes to pay for the services we currently enjoy in Scotland’.
The document says the immediate priorities post-independence will be to increase personal allowance and tax credits by inflation, reduce Air Passenger Duty (APD) by 50%, and cut corporation tax progressively so that it is 3% below the prevailing UK rate.
The Westminster government’s current proposals for tax allowances for some married couples would not be implemented in Scotland, and the government would look at increasing the National Insurance employment allowance for small business to encourage employment.
An independent Scotland would also introduce a more efficient tax system designed to be ‘simple and transparent’, according to the blueprint. It states that over the course of the first independent parliament, the Scottish Government and Revenue Scotland will work together to simplify the tax system to reduce compliance costs, streamline reliefs and help to reduce tax avoidance, with a target revenue gain of £250m a year by the end of the first term.
In addition, the so-called ‘bedroom tax’ or housing benefit reforms would be abolished and the rollout of Universal Credit stopped.
The blueprint also says that there would be a new Scottish regulator which will assume the key responsibilities of the UK Financial Conduct Authority in Scotland. It will work on a closely harmonised basis with the UK regulators, delivering an aligned conduct regulatory framework, to retain a broadly integrated market across the Sterling Area. The regulatory approach will include the application of single rulebooks and supervisory handbooks.
This framework will mean that firms will be able to continue to provide financial products and services no matter where they are based (for example, banks based in the UK will continue to provide services to customers in Scotland and vice versa).
If the referendum votes in favour, the date set for Scottish Independence Day is 24 March 2016.