Scottish Parliament
With the publication of the UK Government’s Calman Bill approaching, there is growing disquiet in Scotland about a perceived lack of detail in the proposals and the speed with which the Calman Commission’s recommendations will be implemented.
In June, a coalition of organisations including the Scottish Council for Voluntary Organisations, the STUC, the Church of Scotland and the Institute of Directors were among the first to raise concerns when they wrote to the UK Government highlighting “uncertainty” around new tax-raising powers likely to feature in the Bill.
Last week these organisations were reportedly joined by up to 57% of Scottish businesses who, according to a Fraser of Allander Institute report, believe that the Calman Commission’s recommendations will significantly impact upon them in terms of time, administration and cost. In common with the joint letter sent in June, the report also notes business concern about a lack of detail on proposals and their potential impact on cross border operations.
Meanwhile, Secretary of State for Scotland, Michael Moore MP, has begun meeting with representatives of business in Scotland to discuss some of the finer details of the Calman Bill, for example, whether or not it will make any changes to the definition of a ‘Scottish taxpayer’ as laid out in the Scotland Act. Thus far this has not been an issue because the Scottish Parliament has not made use of its limited tax-varying powers, however, the Calman Bill will give the Scottish Parliament much wider tax raising powers. This includes a reduction in the basic rate of income tax for Scottish taxpayers, on top of which there would be an additional ‘Scottish’ rate of income tax set by the Scottish Parliament. The Scottish Parliament would then have the choice of using the Scottish income tax rate to bring the overall rate back in line with the rest of the UK, or it could choose to set a rate above or below the UK one.
This could add to the administrative load for cross-border businesses with employees in both Scotland and England as there will be different tax codes for employees classified as Scottish taxpayers. The distinction would also become important if the Scottish Parliament were to introduce any new taxes that the Calman Bill gave it the power to do.
Businesses have concerns above and beyond the substance of the Calman Bill itself though; in the long term there are concerns – rightly or wrongly – that future Scottish Governments may use the new powers to create new regulations and laws that increase the regulatory burden on enterprise at the same time as the UK Government is travelling in the other direction, making a concerted effort to cut what it sees as unnecessary red tape south of the border.
It would, however, be a mistake to assume that the Calman Bill will be overwhelmingly unpopular, or to forget that it could also bring with it a range of new opportunities for businesses in Scotland. For example, the new powers of taxation expected to feature in the Bill could just as easily be used to create a more fertile environment for business in general and the regulatory burden could even be reduced rather than increased.
Whichever vision of the future turns out to be most accurate, it seems likely that the Calman Bill will bring with it both risks and opportunities for almost every business in Scotland.
