SNP Tax policy: Undercut the rest of the UK and start a ‘race to the bottom’

Nicola Sturgeon: She doesn't want you to think about the tax disaster she's planning.

Nicola Sturgeon: She doesn’t want you to think about the tax disaster she’s planning.

Following on from yesterday’s article on how the Scottish National Party wants Scotland to become a tax haven, readers may wish to see the analysis by Richard Murphy, of Tax Research UK.

The Greens, UKIP and SNP all presented tax proposals on January 29, in the run up to the election.

Mr Murphy’s analysis is particularly interesting. He wrote: “The SNP announced plans for a tax rate 3% lower in Scotland than the rest of the UK. Which, of course, they can. Except this is firstly an issue for the Scottish parliament and not Westminster so what it has to do with this election is hard to work out.”

It seems quite easy to work out, in fact – the SNP wants to panic the other parties with a tax rate that invites businesses and jobs to go north of the border. What will they do as a result? Set lower taxes themselves, perhaps? And what happens to all our deficit reduction plans then?

Mr Murphy continues by saying it is also hard “to work out how Scotland will make good the resulting shortfall in the Barnet formula funding allocation to Scotland that will automatically follow from this, straightaway, when any increase in tax revenues resulting from this policy (and I stress the word any, because I suspect there will be none) will be a very long time in coming.”

So it’s potentially a kamikaze policy and could do more harm than good.

Mr Murphy states that this policy will create “disastrous consequences for tax competition in the UK” and points out that “its economic consequences for Scotland really do need to be spelt out so people understand them, because they are pretty ugly”.

Yes they are.

How will SNP supporters spin this, one wonders?

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22 thoughts on “SNP Tax policy: Undercut the rest of the UK and start a ‘race to the bottom’

  1. lizbogue69

    You say that the SNP have agreed to reduce tax by 3%. This is corporation tax and the reduction cannot be made by the devolved Scottish Government as it is a reserved matter to Westminster. The 3% reduction would only become effective in an independent Scotland. It is somewhat disingenuous therefore to state that the SNP are proposing that Scotland would become a tax haven.
    At the moment we are waiting to see what the Westminster Government of whatever colour legislation the proposals of the Smith Commission are.
    Perhaps you could try printing the truth in your article and refrain from writing an article which is factually wrong.

    1. Mike Sivier Post author

      I said the SNP has proposed to reduce corporation tax by three per cent, as reported in the Financial Times and commented upon in Tax Research UK. Factually accurate, that.
      You say we are waiting to see what legislation will come out of the Smith Commission. Factually Inaccurate, that – the Bill has already been tabled.
      I have no problem with the facts.

      1. Ray

        Vox you’ve got it all wrong,yet again, ‘the Bill’ hasn’t been tabled, and won’t be until after GE2015, only a watered down ‘Command Paper’ has been issued, and it doesn’t mention CGT. CGT is at, the moment and according to the Command Paper, because of it’s ommission, will remain a ‘Reserved Matter’.

      2. Mike Sivier Post author

        I’ll just cut you off there, I think.
        I do apologise. You are correct – AS I REPORTED PREVIOUSLY, a command paper has been issued.
        Whether it mentions Capital Gains Tax or not is nothing to do with the discussion here, so your mention of it is utterly irrelevant.
        You go on to suggest that my standards are “appalling”. I consider yours to be worse.
        To be honest, I don’t think the people reading this blog need to be disturbed by your nonsense anymore. Don’t expect me to allow any more of your comments.

  2. Jim Round

    This is, as I said before, one upmanship, plus “modern economics”
    In the way that some advocating the “free market” spit their dummy out when a competitor comes along and offers a service cheaper than they do.
    As said before, personal and business etc… taxation are a minefield with no simple solution.
    On Labour and the SNP in Scotland, Labour needs to get out there and find out exactly why, if the polls are to be believed, they are doing so badly in Scotland.

    1. Mike Sivier Post author

      It’s a mixture of elements. Some people genuinely support the SNP and what it stands for; some are against Scottish Labour for perceived wrongs that may well be justified – it seems that arm of the Labour party has been too complacent for too long; and some have been gulled into believing the constant stream of lies and invective from vocal Scots Nationalists who don’t have any evidence to support their claims but are damned well going to make them anyway.

      1. Jim Round

        An answer could be a Scottish Labour Party that can affiliate itself to Labour if it so wishes, rather than be a so called “branch office”
        “Vocal Scottish Nationalists” are no different to a vocal MSM, youhave to just lay your cards on the table, popular or not, backed up with real facts and evidence and no rhetoric, and let the electorate decide from there.
        I agree with you on complacency.

      2. Ray

        Vox, Fact not Brag, Scottish Labour do not exist, there is no such political party registered in the UK, ‘Scottish Labour; is a branch Office, check out the EC register.

        As for lies, well how about Margaret Curran MP,, on twitter ‘She claimed to have ‘Voted against Fracking’ at WM when she didn’t even VOTE in the debate, as like all but 17 Labour MP’s she and her fellow travellers Abstained’, now doesn’t matter how you look at it an ‘Abstention’ is not VOTING’

        Then we have have Jim (I’ve never been a Unionist) Murphy as ‘Leader of the Scottish Branch Office’ of the ‘Party of the Union ‘ to quote on Hilary Benn, Labour MP and son of Tony, so if Jim Murphy has never been a Unionist why is he leading the Scottish Branch of the Party of the Union’?

        Then let’s look at Jackie Baillie MSP, who everyone in her constituency knows that the only time she is not lying is when she doesn’t say anything nor commit word to media. She introduced a member of Labour’s Shadow Cabinet and member of Labour’s NPF as a non political ‘ordinary mum’ during IndyRef!

        No not one allegation that can’t be proven, I have given but three, please oh please do your homework Vox, I do believe you are a good and honest Socialist, but you are not backing a Socialist Party. in Labour, you are backing Red Tories.

      3. Mike Sivier Post author

        Scottish Labour does exist, as there is very clearly a Labour Party in Scotland.
        You are playing with words in an attempt to sow confusion. Don’t bother; it won’t wash here.
        Next you present the lie about Margaret Curran as if it hasn’t already been debunked here many times. Don’t you bother to read Hansard? She voted no less than five times during that debate – each time against the government.
        I shall not bother to go on – your argument is broken. Suffice it to say that I do check my information. It’s something you and your colleagues should try.

  3. Bookmanwales

    Another party that wants to adopt Tory style economics. This all seems a bit strange given that Scotland is already a poor region (forgetting the oil which benefits only a few multinationals) and lowering business tax further will only increase poverty ?

    I can’t understand why the sudden rush in the UK to rush to the bottom of the world in poverty and human rights. Higher living standards and better human rights are what we tell the rest of the world to aim for whilst continually trying to undermine our own ?

    Lower business taxes do not necessarilly create jobs, take a look at Luxembourg, most business addresses are merely PO Boxes employing no one. Eire has a lower corporation tax level than us yet few jobs have been created as a result, in fact their economy is as bad if not worse than ours ?

    Lower taxes mean lower investment in a country’s infrastructure leading to business having to build their own, something most busnesses are unlikely to do, unless of course you are Amazon and money is thrown at you to build your supersize, billion pound, minimum wage, non taxable business.

  4. Thomas M

    They are not perfect, but I like the SNP. All the other parties on mainland Britain other then the big three are either a)far too small to gain any seats, or at best can get maybe 1 to 3 seats (Greens, Plaid Cymru, TUSC, Left Unity ect) or they are nasty/racist ( BNP, UKIP and the like.) The SNP have the chance to gain a lot of seats despite our unfair voting system.

    1. Mike Sivier Post author

      I’m not convinced by the SNP at all. Its policies seem designed to create the most disruption possible to the UK as a whole and its attitude has certainly brought out the worst in its followers.

    1. Mike Sivier Post author

      Cutting you off there, Peter.
      Firstly, I’m no coward. Secondly, I’m not approving any comment in which the commenter calls me a liar – as yours did. I didn’t lie, therefore you are acting dishonestly in calling my site into question. Thirdly, I’ve never seen you here before; why decide to come sniffing round here trying to bring me down now? Your actions are extremely suspicious. I don’t see any reason to put up with you at all – and I’m certainly not going to ask my readers to do so.

  5. Hector James Haddow

    If HMRC was even remotely competent the tax rates of neighboring countries would not be an issue.
    As for Murphy saying “when any increase in tax revenues resulting from this policy (and I stress the word any, because I suspect there will be none) will be a very long time in coming.” he’s neglecting to include the other half of the policy, the SNP inends to collect taxes unlike successive Westminster governments.
    HMRC only collects an estimated 87% of corporation tax owed (the actual number is probably lower) if Scotland were to reduce tax avoidance and evasion by just 50% then there would be a 6.5% increase in revenues far offsetting the 3% reduction in rates resulting in an increase of about 3.7% ((87+6.5)*0.97=90.7%)

  6. Andrew Sinclair

    I may be mistaken as I thought responsibilty for setting Corporation Tax has been given to the Northern Ireland assembly. If it has, aren’t they then in a position to start a race to the bottom? What’s the difference between granting this power to N.Ireland and not to Scotland? I don’t follow any logic in granting it to one but not the other.

  7. Emerson

    “And what happens to all our deficit reduction plans then?”

    Well, cut working age benefits across the board of course!

  8. Andrew Sinclair

    Isn’t this a kind of facile debate though? I’ve run businesses and given strategic planning and marketing advice to blue chip household names. Although the rate of corporation tax may be a factor in making corporate investment or market entry/exit plans. It’s only one factor amongst many. Relief on R&D investment, inward location grants, staff/people/HR considerations, costs of operating in the location, distance/proximity to markets/customers/suppliers are just some of the other factors. Some of these are outwith Government control, others are not. So why focus on Corporation Tax?

    Reducing the “debate” to any single factor, in this case a theoretical factor, really is a facile and pointless.

    And to say that there is a direct link between the rate at which corporation tax is levied and cutting benefits for all working age people is illogical.

    1. Mike Sivier Post author

      Why focus on Corporation Tax? Simple: It’s what the SNP offered us.
      So what you’re really saying is that the SNP, by only telling us (through the FT) its plan for Corporation Tax, is being facile and pointless.
      As for linking Corporation Tax and benefit cuts, please lay credit where it is due; that was a fellow commenter, not the article.

  9. Andrew Sinclair

    Mike, I wasn’t having a got at you at all about linking Coproration Tax with benefit cuts. I agree that was the other poster – Emerson. however, you did seem to agree with him.

    I’m glad you acknowledge that the the SNP has never said “Corporation Tax” is the solution completely and utterly on it’s own. Merely that it was reported in that way. So unless you and I were in the room at the time of that interview, we can’t know exactly what was said. I’d be reasonably sure that other matters were discussed but we live in an age of “soundbite journalism” and CT was probably the easiest thing to sensationalise.

    Anyway, for me, and my clients, at the moment this is all pie in the sky. The Scottish Government dos not have control over Corporation Tax levies. Nor are there any plans, drafts, command papers or any other intentions stated to give them such controls within a reasonable planning horizon. Caveat : We are at the most unpredictable stage of UK politics for many years.

    Would you care to comment on the point I made about N.Ireland being granted control over Corporation Tax? It seems a reasonable question. What happens if Stormont starts a race to the bottom?

    1. Mike Sivier Post author

      The impression I get from the FT was that it wasn’t an interview but a press release – and so the pendulum of inquiry swings back to the SNP again.
      You’re exactly right about the fact that Corporation Tax isn’t in the Scottish Government’s arsenal and a unique Corporation Tax for Scotland isn’t likely to be a priority for Westminster after the general election, which is probably why Richard Murphy on Tax Research UK stated: “this is firstly an issue for the Scottish parliament and not Westminster so what it has to do with this election is hard to work out”.
      As far as Northern Ireland is concerned… no, I wouldn’t like to comment at this point. Instead, have a look at Richard Murphy’s expert opinion.

Comments are closed.