Tax Independence Would Cost Scotland

June 3, 2010 International Tax CooperationTaxation in UK

Bute HouseGiving Scotland complete independence in raising tax revenues and setting tax rates would bear a great cost for Scotland, and fragment the UK’s tax system.

On June 3rd Iain McMillan, director of the Confederation of British Industry (CBI) Scotland, released a statement claiming that full fiscal autonomy for the Government of Scotland would bear “undoubted costs and risks” for the economy. According to the Iain McMillan, a separated Scottish tax regime would result in increased business costs, along with either raised tax burdens or heavily reduced public spending. Additionally, Scotland would be forced to fund its own share of the cumulative UK national debt.

Iain McMillan’s statement comes in response to a camping launched by the Scottish think-tank Reform Scotland, which calls for full fiscal autonomy and independent tax raising powers for Scotland. According to Geoff Mawdsley, director of Reform Scotland, the campaign, which was launched on June 3rd, has already raised a lot of national interest and support. He argues that with independent financial responsibility, the Government of Scotland will be forced to instate its own measures to attract and spur business growth, and subsequently in a more responsible and beneficial measure. Conversely, Iain McMillan disputes the claim, saying that the in its current state, the Scottish economy is not able to raise the taxes it requires to cover its own Government expenses.

Iain McLean, who is also a professor of politics at Oxford University, was previously a member of the Calman Commission which recommended partial tax autonomy for Scotland. He elaborated on his opinion saying that he is not completely opposed to the idea of Scottish financial autonomy, but considers current proposals to be incomplete and in need of further consideration. Iain McLean concluded by saying, “Those who call for fiscal autonomy need to make a much stronger and more detailed and sophisticated case than they have thus far.”

Photo by Scottish Government