{The Northbriton own opinion is: Swinney steers towards a high-tax economy.as a matter of course} Having the responsibility of raising the tax revenue which they spend was supposed to make Holyrood’s politicians more accountable to voters. The account of his intentions which John Swinney, Scotland’s finance secretary, presented to MSPs yesterday could not be clearer. It looks like a laudable benefit to lower income earners, but the increased levy on middle earners and the clobbering of the rich may be a signal which damages the Scottish economy. His announcement of the thresholds and rates for the Scottish government-controlled Land and Buildings Transaction Tax which will replace the Westminster-run stamp duty played to an obvious political gallery. Many at lower income levels will pay less tax, almost as many middle-income earners will pay a bit more, and the few rich people will pay a lot more. No doubt many, and not just those who will benefit from the property transaction tax rates announced by Mr Swinney, will applaud that. The finance minister praised his own decision as essentially Scottish, or fitting the perceived Scottish desire that the burden of tax should essentially fall on the rich. Unfortunately for them and Mr Swinney, such simplicities do not necessarily fit easily into the complex modern money world. The immediate effect is likely to be a disruption in the property market. Buyers who would benefit could delay purchases until next April, when the new tax takes effect, and buyers facing an increased bill would rush to complete a deal before April. The longer-term effects are also likely to negate Mr Swinney’s good intentions. If the lower rate LBTT has the effect Mr Swinney desires – of encouraging more first-time and lower-income buyers – then more people will enter the property market, driving prices up and resulting in people having to pay the same total amount for a property, even though the tax element might be lower. At the upper end, awareness of a hefty tax to be paid on buying a house will mean that buyers adjust their purchasing budgets to pay less to the seller in compensation for the extra tax which will go to Mr Swinney. He argues that 45 per cent of current purchasers will be paying less tax. That means 55 per cent will be paying more tax. Since the extra tax kicks in at the relatively modest £325,000 price mark, this is a tax increase that will hit people of relatively modest means. This is potentially a very damaging signal. As more tax powers, including possibly virtually complete control of income tax, are set to be devolved, continuing to follow this pattern tells both existing high earners who might contemplate moving to Scotland, and Scots who aspire to be high earners, that Scotland is likely to be a high-tax country. Since encouraging both these type of people is important for generating growth, the ultimate effect of this tax may do more damage than good.
Posted on: Fri, 10 Oct 2014 07:26:53 +0000
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