Begbie joins voices calling for Scottish tax reform – Daily Business

Pressure is mounting on the Scottish Government to review its tax regime amid concern that it is leading to lower revenue and will damage competitiveness.

Sandy Begbie, chief executive of Scottish Financial Enterprise, has joined a growing chorus of voices calling for a rethink of the 48p top rate of income tax and the six bands.

He has urged First Minister John Swinney to “urgently commission an emergency audit of Scotland’s income tax system before the next budget” following new analysis that in its first year the new top rate was likely to cost the public purse £22 million.

This is because of “behavioural changes” among high earners who are adopting measures such as salary sacrifice and pension contributions to mitigate the impact of the tax.

If there had been no behavioural impact of the top rate, it would have been expected to raise an extra £53m for public services, according to the independent Scottish Fiscal Commission.

Dan Neidle, who produced the analysis on the top rate for Tax Policy Associates, was a member of the government’s tax advisory group which was wound up earlier this year. He said he was not consulted on the tax changes.

Research from the wealth manager Rathbones this week revealed that those on the biggest salaries could save up to £46,000 over five years by commuting from England, a practice highlighted by Mr Begbie in an interview with Daily Business earlier this year. He mentioned a law firm with partners “who work three days a week in Scotland but continue to live down south”.

The Institute of Chartered Accountants of Scotland has claimed tax divergence with England is now reaching a tipping point where it leaves Scotland less competitive.

Mr Begbie told The Times: “The Scottish government appears to have so far refused to engage with the Tax Policy Associates analysis. That is unacceptable and highlights exactly why we need an urgent, independent assessment of the evidence. 

“While the current tax policy might be best for political point scoring, can it be said, hand on heart, that it is the best thing for economic growth?”

Craig Hoy, the Scottish Tory finance spokesman, said  “These bombshell revelations raise serious questions about the SNP’s entire tax strategy.

“The fact they didn’t even consult one of their tax advisers before forcing Scots to pay more in tax is astonishing and an act of utter negligence.

“We now know that this tax hike resulted in less revenue for the public finances which are already in a dire state after two decades of nationalist mismanagement.

“It also sums up the arrogance at the heart of John Swinney’s SNP government. Despite repeated warnings that they cannot tax their way to economic growth, they have ploughed ahead regardless.

“Swinney and his ministers should come clean on why they thought this was a good idea and why they failed to ask for advice from economic experts.”

A spokesman for the Scottish government said it was “common practice” to inform only the Scottish Fiscal Commission and HMRC about their plans before they were announced publicly.

Responding to Mr Begbie’s comments, the spokesman added: “Tax decisions for 2027/28 will be announced in the Scottish budget later this year. Ministers look forward to engaging on these important issues with Mr Begbie, wider stakeholders and across the parliament.”