When the Scottish government received the rights to change Scotland’s first independent tax laws for 300 years it did not take the SNP long to make an announcement. John Swinney, the finance minister, took his red pen to the stamp duty taxes of the UK introducing a new property tax across Scotland. The idea was to reduce the tax on property transactions for relatively small amounts and milk those at the higher end of the spectrum for yet more taxation. Simple?
Well, no sooner have the SNP delivered its first independent tax policy for over 300 years than George Osborne announced changes to the rest of the UK stamp duty system.
Undercut and forced into a U-turn
The reduction in UK stamp duty rates undercut the Scottish government and very quickly the SNP was forced into a very embarrassing U-turn. Blaming the UK government for a reduction in short-term property tax income, despite the fact the SNP was warned about a shortfall, they were revised to more be reflective of the UK situation as a whole. First test taken, first test failed!
Whichever side of the fence you are sitting it does seem as though the rest of the UK will ultimately dictate such important taxes as those related to property. The Scottish government has fought long and hard for new controls over an array of taxes and will no doubt make adjustments accordingly. However, an unexpected undercut from the UK government forced a very quick adjustment to the proposed property tax bands and maybe we will see a consensus across the UK in the future?
Does this add confusion and uncertainty to the Scottish property market?
Over the next few years, with the party likely to return a significant majority in the general election, the SNP will probably have total control of the Scottish Parliament. This is a party which is still hell bent on splitting up the UK, despite the fact that voters turned down this offer just last year, although how it will handle new tax controls remains to be seen. There is every likelihood we will see yet more taxation of those at the higher end of the wealth spectrum and a reduction in taxation for those at the lower end. What impact will this have in the longer term?
There is serious concern that yet more taxing of the rich will see many businesses and rich individuals move to other areas of the UK. The SNP has stated it will work for the people at the lower end of the income spectrum but at the end of the day large businesses and rich individuals are the hub of not only the property market but the economy in general. If we see something of a brain drain from Scotland because of the taxation issue who will benefit and who will lose out in the longer term?
Even though the Scottish government now has agreements in place for a variety of tax controls to be transferred from the rest of the UK, will they really have much leeway? They may huff and they may puff about taxing the rich but at the end of the day nobody benefits from a reduction in business activity and tax receipts. So, while they may like to appeal to the working public and “bash the rich” the reality is that this would create serious uncertainty within the Scottish property market, amongst others, and do Scotland a disservice going forward.
Let’s see how responsible the SNP really is?