THE Scottish Government will keep taxation under review, Kate Forbes has said, after a survey suggested concerns around tax and recruitment could threaten Scotland’s economic growth.
The quarterly economic indicator survey for the Scottish Chambers of Commerce (SCC), which surveyed 410 businesses between May and June, found taxation and recruitment were the leading concerns for firms.
Taxation concerned 52% of firms, overtaking inflation on 50%, and SCC president Stephen Leckie warned that divergence between the Scottish and UK governments may have exacerbated anxieties.
People in Scotland earning more than £28,867 pay more income tax than their UK counterparts after changes by the Scottish Government, while a 45% advanced rate was introduced for those earning between £75,000 and £125,140.
The Deputy First Minister (below) said that as inflation has reduced, “obviously taxation is becoming of greater significance”, and that it will be kept under review.
She told BBC Radio Scotland’s Good Morning Scotland programme: “In terms of taxation more generally, we do need to keep it under review.
“We have seen the figures from HMRC over the last few years show that there’s still more people coming into Scotland than leaving Scotland, which is important when it comes to recruitment.
“If you look beyond 2017 basically, at the graph, you see a rise across all wage bands of people choosing to move to Scotland, but we said from the moment that tax was devolved that we needed to keep the behavioural impact under review because we do want to attract people to Scotland and I take the comments that the chambers have made seriously.”
She said she has expressed concerns in recent weeks that Scotland will not see a fundamental change under Labour compared with the Conservatives when it comes to the country’s budget.
Forbes said: “What we need to see is an injection of cash, as it were, into Scotland’s public services and that starts with the UK Government taking a different approach to our budget.”
The survey found that recruitment difficulties increased from 47% to 55% compared with the last quarter, with labour costs affecting three-quarters of firms. Leckie said both governments must set out plans to address taxation concerns. He said: “Taxation continues to concern firms, to the extent that the issue has overtaken inflation as the leading concern.
“This is having a major impact in attracting and retaining talent in Scotland, contributing to the significant labour challenges many businesses are already experiencing. Divergence on personal taxation has exacerbated the issue.
“Businesses will be looking to both the Scottish and UK government to set out long-term plans to address the current state of taxation which is impacting growth, investment and talent.”
The survey also showed “significant improvement” in cashflow and profits for firms, while investment trends remained “generally positive”.
Forbes told the BBC she would work with the UK Government to boost economic growth in Scotland. She said: “Economic growth is one of the areas that goes cuts right across devolved and reserved responsibilities.
“So I see it as an opportunity to work very closely with the UK Government to put in place the policies that are going to lead to economic growth.”
Speaking before the BBC interview, Forbes said: “Scotland has the most progressive income tax system in the UK, protecting those who earn less and asking those who earn more to contribute more.
“This in turn allows for a more comprehensive set of services in Scotland compared to the rest of the UK, including free prescriptions and free university tuition.”
A UK Government spokesperson said: “Growth is a national mission for us, and Scotland will be at the beating heart of our UK-wide mission.
“As part of this, we are working closely with the Scottish Government to partner with businesses throughout the UK to stimulate investment.
“It is vital the tax system supports growth, which is why, to help firms plan investments, we will retain full expensing, publish a business tax road map in due course, and have committed to not increase corporation tax.”
