Tax plans put forward by Tory leadership candidate Boris Johnson could result in an “unassailable financial rift between Scotland and the rest of the UK”, an expert has warned.
Stephen Oates, tax director for chartered accountancy firm French Duncan, said the former foreign secretary’s plans to increase the threshold for the 40p tax rate in the rest of the UK would make it harder for companies north of the border to attract new workers.
Such changes could “potentially cause serious problems in a very short period of time”, he added.
Mr Oates said: “Anything which results in a key part of the UK become a substantially less attractive place to work needs to be reconsidered immediately.”
The tax expert spoke out ahead of Mr Johnson and his rival Tory leadership candidate Jeremy Hunt travelling to Scotland to take part in a hustings for Conservative Party members.
With both men vying to succeed Theresa May and move into Downing Street, Mr Johnson has outlined radical tax plans to raise the threshold for the 40p rate of income tax from its current level of £50,000 to £80,000.
But with control over income tax rates and bands devolved to Holyrood, the change would not apply in Scotland – where those earning £43,430 a year or more already pay income tax at the slightly higher rate of 41p.
This, coupled with an increase in National Insurance Contributions (NICs) under Mr Johnson’s proposals, would mean Scots earning £80,000 a year paying £7,844 more in tax and NICs than someone on the same salary south of the border.
Mr Oates said: “At a time when there has never been greater competition for Scotland to attract the very best people for key jobs, the implementation of this tax policy by an incoming prime minister would have serious repercussions for the Scottish economy if not replicated by the Scottish Government.”
He added existing Scottish Government policies, where higher earners pay more in tax but lower earners have reduced bills, already had “the potential to negatively impact upon the ability of firms in Scotland to attract key personnel”.
But he said Mr Johnson’s tax plans “would accelerate the negative impact on recruitment”.
He said: “The proposed changes impact higher paid employees across all of Scotland and not just on Edinburgh’s financial and professional services market.
“It makes it more difficult to hire a rural GP in the Scottish islands, to get a dentist in Inverness, a senior policeman in Dumfries or a lawyer in Dundee.
“Tax differentials within the same country will continue to produce problems, which will worsen skills shortages in key areas.
“The situation is further exacerbated by Boris Johnson’s proposal to increase National Insurance Contributions (NICs) to pay for the tax cut for higher earners.”
He added: “As NIC is not devolved, better paid Scots will be paying higher NIC without benefiting from the increase to the higher rate tax threshold.
“Although this is a proposal at the moment it has the potential to cause a serious and unassailable financial rift between Scotland and the rest of the UK.
“The current SNP tax policy will produce the same issues over time but this idea will simply fast track this problem to the top of the agenda within days of it occurring.”