The Income Tax discussion paper explained

First Minister Nicola Sturgeon and Finance Secretary Derek Mackay have today launched a discussion paper on Income Tax in Scotland, ahead of the publication of the Scottish Government’s budget.

Here’s what you need to know.

The time is right to consider afresh the role of tax in our budget decisions.

Over the 10-year period to 2019-20 the UK government will have cut Scotland’s budget by £2.9 billion in real terms.

We also now face the damaging impact of Brexit, which could cost 80,000 jobs over a decade and see more than £11 billion a year wiped off our economy by 2030.

And all of this comes at a time where people are living longer, which is good news, but places ever greater demands on public services like our NHS and social care.

We will not agree to any proposals for Income Tax that do not meet four key tests.  

Any approach to Income Tax must:

1.     protect and improve public services in the face of UK spending cuts;

2.     protect the incomes of low earners;

3.     make the tax system more progressive and reduce inequality; and

4.     support the economy.

The discussion paper sets out four alternative approaches to Income Tax that meet the four tests and will protect low earners.

None of the approaches would see anyone earning up to £31,000 a year pay a penny more than they do now. And more than 70 per cent of all adults would continue to pay no tax at all or no more tax than they do now.

We will continue to protect the social contract and ensure Scotland remains the most cost effective place to live in the UK.  

We are already delivering public service provision and a range of social benefits that far exceeds what is available anywhere elsewhere in the UK, including free medicine, no university tuition fees and free personal care for older people.

In the coming years, we are committed to increasing funding for our health services, expanding childcare, giving more money direct to schools, extending broadband, building more homes, giving public sector workers a pay rise, investing in our economy and more.

As a minority government, we will seek a consensus on taxation in Scotland.

The discussion paper sets out the taxation policies of opposition parties at Holyrood and applies the four key tests – we will not agree to any approach that does not meet these tests.

We will talk to business organisations, charities, trade unions and taxpayers about the best approach to take.

The First Minister has signalled the SNP government’s willingness to compromise and to build a consensus around a fair and balanced approach to tax.

Read the paper in full here.