Scottish Independence Will Hike Taxes

November 27, 2013 Taxation In EuropeTaxation in UK

Scottish taxLONDON – The financial burden of Scotland’s independence will be borne by the country’s taxpayers, as they will face steep and permanent tax hikes within four years of the country leaving the UK.

In a letter dated November 26th the Chief Secretary to the Treasury Danny Alexander warned the First Minister of Scotland Alex Salmond that, according to the results of calculations completed by the Treasury, Scottish taxpayers would face a tax hike of approximately GBP 1 000 per person per year if Scotland obtains independence from the UK.

Scotland is scheduled to conduct a nationwide referendum on the question of national independence on September 18th, and if a clear approval is shown, the country could leave the UK within two years.

The Treasury’s warning comes the day before the government of Scotland is set to release a new white paper outlining a hypothetical economic plan for Scotland if it is granted independence from the UK.

The Treasury’s calculations were based on recent research completed by the Institute of Fiscal Studies, showing that in order to maintain a balanced budget, upon leaving the UK, the Scottish government would be forced to either slash public spending by 6 percent, or to institute a VAT rate of at least 28 percent, or to hike income tax by 9 percent.

According to Danny Alexander, the results of the calculations offer a stark reminder that Scotland may enjoy a better financial positions within the UK, and, even under the most optimistic conditions, the newly independent Scottish government could not put off enacting permanent tax hikes until 2022.

Photo by Emz.watson