Weekly tax brief

A wealth tax for Scotland?

16 June 2021
Recent revelations about the low level of tax paid by some wealthy US taxpayers have once again brought the subject of inequality in our society and tax systems to the fore. Unless they are tax havens, governments worldwide raise most of their tax on income earned by individuals. For their part, in many cases wealthier individuals can manage their income, so reducing their tax burden. How tax authorities obtain more from those individuals is a subject of global debate.

Last month’s Scottish Parliamentary election result could raise the topic once more. While the SNP was the clear winner in that election, it did not secure the 65 seats required for a majority in the chamber. The Green Party increased its representation, but still has only seven seats and less than 10 per cent of the vote.

As was the case in the previous session, the SNP has entered into discussions with the Greens over a formal co-operation agreement.  Both parties are clear this would not be a coalition, but a co-operation where their policy objectives are aligned.

Recovery from the pandemic is clearly the top priority for all parties, but Scottish Independence remains the cornerstone of the SNP manifesto. The Green Party is the only other party that can be said to be pro-independence, which makes it the most likely contender to work with the SNP in this Parliament. Both parties are also focused on the climate emergency and co-operation here is also likely.

Where their manifestos diverge is on tax policy. In light of the pandemic’s impact on the economy, the SNP has proposed a similar approach to the rest of the UK – a freezing of income tax rates and only inflationary increases to bands. Historically, while it may have wished to increase tax rates on higher earners, concerns this would drive away wealthier taxpayers have kept such increases modest.

The Green Party however supports a more progressive approach to income tax, as well as higher taxes on wealth and consumption for the wealthiest in Scotland. In particular, it supports a one per cent annual wealth tax on millionaires. This could cause an outcry, as the calculation of wealth would include pension pots as well as the more obvious land, property and other assets. 

Independence would deliver more control over taxes that currently sit with Westminster, but the Green Party proposes an alternative - to empower local authorities to introduce wealth taxes in their own areas.

How much of the tax agenda the Greens seek to secure in the co-operation discussions remains to be seen. There is a view that the party did not maximise its influence in the last Parliament and will wish to be more robust this time. But with only one vote required for a majority, their bargaining power may not be as strong in this area as it might seem.