‘No definitive evidence’ higher rate top tax rate is cutting revenue – Robison

Scotland’s Finance Secretary has said there is “no definitive evidence” of the Scottish Government’s increase on income tax for top earners having led to a reduction in revenue.

The Institute for Fiscal Studies (IFS) warned changes already imposed may have “slightly reduced” revenues for Holyrood in a paper published last week, as it called for Ministers to “at least pause” any plans to increase income taxes for higher earners in Scotland in next month’s Budget.

The think tank stressed there is a “significant degree of uncertainty about the scale of effects”, but said two studies by HMRC suggest “previous increases in Scotland’s top rate of income tax will have slightly reduced revenues rather than slightly increased them”.

Shona Robison was questioned on the issue at the Scottish Parliament by Scottish Tory economy spokesman Murdo Fraser, who said the warnings should be a wake-up call for the SNP.

Ms Robison said: “The IFS were clear that they did not have any definitive evidence of any suggested reduction of revenue raised from the highest earners in Scotland in recent years.”

Mr Fraser said: “I would just quote directly from David Phillips of the Institute of Fiscal Studies, who said: ‘Increases of the top rate of tax are unlikely to raise much with evidence from the first of Scotland’s reforms in 2018/19 suggesting they may even reduce revenue.’

“Those are his words, not mine.

“These warnings from the Institute of Fiscal Studies should be a wake-up call to the SNP. For years, we warned that continually increasing tax on the highest earners will be counterproductive.

“The same message has come from Scottish business and now we hear from the respected and independent Institute of Fiscal Studies.

“So will the Scottish Government finally listen to all these warnings, put economic growth first in its forthcoming budget and commit to reducing the tax burden on hardworking Scottish families rather than further increasing it?”

Ms Robison replied: “Let me repeat, the IFS are clear that the uncertainties associated with the behavioural impact of our tax policy are very high indeed.”

She added: “From the introduction of Scottish income tax in 2017/18 more taxpayers have come to Scotland than have left, with net inflows averaging almost 4,200 per year, and more high earning taxpayers came to Scotland than left in 2021/22, the latest year for which we have data.”

Ms Robison called on the Tories to show where the money would come from for tax cuts, saying: “It’s all very well to suggest tax cuts, but you also have to explain the other side of the coin, which is where those cuts would fall.”

IFS associate director Mr Phillips said “the evidence currently available suggests that if the aim is to raise revenue, the Scottish Government should at least pause any plans for further increases in Scotland’s tax rates on higher incomes”.

Under the current tax regimes, people in Scotland earning £26,562 a year or more pay more income tax than those in the rest of the UK.

While someone with an annual income of £25,000 pays £23 a year less in Scotland than elsewhere in the UK, someone with an annual salary of £50,000 pays £1,540 a year more in Scotland, with this rising to £3,346 more for those earning £100,000 a year or higher.