Low and middle income earners protected by tax changes, Derek Mackay says
Changes to income tax in Scotland will help to protect low and middle-income earners, according to Finance Secretary Derek Mackay.
MSPs will vote on Scottish rates and limits for the tax year 2019-20 on Tuesday.
No changes were made to rates and no new bands were introduced or removed in the budget announced in December, following a reform of income tax in 2017, which increased higher rates and brought in two additional income-tax bands.
The starter and basic rate bands of 19p and 20p respectively will increase in line with inflation while the threshold for the higher rate of tax was frozen at £43,430 – unlike in the rest of the UK where it will rise to £50,000 in April.
Ahead of the vote, Mr Mackay suggested the tax plans will allow revenue to be raised to support investment in public services.
He said: “Our decisions have resulted in a more progressive tax system, protecting those lower and middle income taxpayers while raising additional revenue to invest in our public services and the Scottish economy. Our policies on tax make Scotland an attractive place to live, work and invest.
“The Scottish Budget proposes an additional £2 billion of investment. It provides an increase of almost £730 million for health and care services, more than £180 million to raise attainment in our schools and gives a vital boost to our economy through a £5 billion infrastructure programme.
“It does so in the context of continuing UK austerity and against a backdrop of uncertainty around Brexit.”
A final vote on the Scottish Budget for 2019/20 will be held on Thursday.
The Scottish Government has indicated that 55% of taxpayers will pay less income tax next year than if they lived elsewhere in the UK, with 99% paying less income tax than they do this year on their current income.
Freezing the higher rate threshold – paid by only the top 15% of taxpayers in Scotland – at £43,430 is expected to deliver an additional £68 million.
Labour finance spokesman James Kelly urged the Scottish Government to go further in taxing the country’s highest earners.
Mr Kelly said: “The SNP’s tax plan means tax cuts for chief executives and public service cuts for communities across Scotland.
“The budget is set to cut funding for councils by £230 million that will put services like schools and social care at risk.
“It’s disgraceful that the budget leaves chief executives and Scottish ministers paying less tax while vital services face the axe.
“Labour would invest in our people, communities and public services, starting with a 50p top rate of tax.”
In his speech on Tuesday, Scottish Conservative finance spokesman Murdo Fraser, will say: “Today’s rates resolution is another broken promise to the Scottish people.
“This is an SNP government elected on a manifesto not to increase income tax rates and it has again broken that promise.
“In 2016 almost two-thirds of Scots, 64.6%, voted for parties that promised not to raise taxes in the Scottish Parliament’s election, either the SNP or the Scottish Conservatives.
“Today the SNP have let these people down again. We will say to the Scottish people, there is at least one party that is on your side, one party that does not want to see the income-tax gap between Scotland and the rest of the UK growing, one party which will oppose the unfair car park tax, and that is the Scottish Conservatives.
“We will oppose the rates resolution today which can only damage the Scottish economy and our hard-working families.”
Scottish Greens co-convener Patrick Harvie indicated that his party will allow the resolution to pass.
Mr Harvie said: “MSPs on all sides should be straining every sinew to protect public services and tackle inequality but sadly we have three other opposition parties who’d rather posture than engage constructively and we have a government reluctant to anger right-wing voices by going further on income tax.
“That’s a misjudgement – we shouldn’t be letting policy on income tax be influenced by the kind of people who are currently losing their grip over car parking.
“Green pressure in recent years resulted in the new, fairer system of rates and bands which means lower earners get a break and higher earners pay a more appropriate share. It has brought an additional £500 million into our public services. It’s a modest start and Greens will seek to build on it.
“We will allow the rate resolution to pass so that the budget deal to protect local services can proceed to the final budget vote.”