Tartan tax
Encyclopedia
The Scottish Variable Rate (SVR) is a mechanism which enables the Scottish Government to vary (down or up) the basic rate of UK income tax by up to 3p in the pound. The power has never been used, either by the Labour-Liberal Democrat coalition government (1999-2007) or by the Scottish National Party minority government (2007-2011) or majority government (since 2011), and will be succeeded by the new legislative framework for Scottish public finance in the Scotland Bill 2010-11.
When legislating for the Scottish Parliament
, a number of matters were reserved
by the UK Parliament ('Westminster'). One such reserved matter was taxation; however, this had been a key point in Scottish negotiations relating to parliamentary control. As a means of compromise, Westminster afforded the Scottish Parliament the ability to vary income tax, which was subsequently given the consent of the Scottish electorate in the 2nd question of the 1997 devolution referendum.
Therefore, the Scotland Act 1998
granted the Scottish Parliament
the power to vary income tax
by +/- 3p in every pound
. This power is often referred to as the tartan tax, a phrase first used by Michael Forsyth
as a way of attacking the power, using the idea of 'tartan
' to get across the idea that it would be an extra tax on Scots alone. However, the phrase "tartan tax" would only correctly apply if the tax were varied upwards - no phrase has yet been suggested if the tax were varied downwards. To date, the Scottish Parliament has chosen not to utilise its tax varying powers. However, rather ironically, the Scottish National Party 'surrendered' their ability to utilise this power in 2010, as announced by the Secretary of State for Scotland, Michael Moore MP, in what has become known as the 'tartan tax scandal'.
When legislating for the Scottish Parliament
Scottish Parliament
The Scottish Parliament is the devolved national, unicameral legislature of Scotland, located in the Holyrood area of the capital, Edinburgh. The Parliament, informally referred to as "Holyrood", is a democratically elected body comprising 129 members known as Members of the Scottish Parliament...
, a number of matters were reserved
Reserved matters
In the United Kingdom reserved matters and excepted matters are the areas of government policy where Parliament had kept the power to make laws in Scotland, Northern Ireland and Wales....
by the UK Parliament ('Westminster'). One such reserved matter was taxation; however, this had been a key point in Scottish negotiations relating to parliamentary control. As a means of compromise, Westminster afforded the Scottish Parliament the ability to vary income tax, which was subsequently given the consent of the Scottish electorate in the 2nd question of the 1997 devolution referendum.
Therefore, the Scotland Act 1998
Scotland Act 1998
The Scotland Act 1998 is an Act of the Parliament of the United Kingdom. It is the Act which established the devolved Scottish Parliament.The Act will be amended by the Scotland Bill 2011, if and when it receives royal assent.-History:...
granted the Scottish Parliament
Scottish Parliament
The Scottish Parliament is the devolved national, unicameral legislature of Scotland, located in the Holyrood area of the capital, Edinburgh. The Parliament, informally referred to as "Holyrood", is a democratically elected body comprising 129 members known as Members of the Scottish Parliament...
the power to vary income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
by +/- 3p in every pound
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
. This power is often referred to as the tartan tax, a phrase first used by Michael Forsyth
Michael Forsyth, Baron Forsyth of Drumlean
Michael Bruce Forsyth, Baron Forsyth of Drumlean PC, Kt is a British financier and politician, who was the Member of Parliament for Stirling from 1983 to 1997 and served in the cabinet of John Major as Secretary of State for Scotland from 1995 to 1997...
as a way of attacking the power, using the idea of 'tartan
Tartan
Tartan is a pattern consisting of criss-crossed horizontal and vertical bands in multiple colours. Tartans originated in woven wool, but now they are made in many other materials. Tartan is particularly associated with Scotland. Scottish kilts almost always have tartan patterns...
' to get across the idea that it would be an extra tax on Scots alone. However, the phrase "tartan tax" would only correctly apply if the tax were varied upwards - no phrase has yet been suggested if the tax were varied downwards. To date, the Scottish Parliament has chosen not to utilise its tax varying powers. However, rather ironically, the Scottish National Party 'surrendered' their ability to utilise this power in 2010, as announced by the Secretary of State for Scotland, Michael Moore MP, in what has become known as the 'tartan tax scandal'.
Demands for greater tax varying powers
Though the present tax varying power have not been used, demands for extra powers for the Scottish parliament have included demands for fiscal autonomy which would give control over all taxes raised in Scotland to the Scottish Parliament.See also
- Fiscal autonomy
- HM Revenue and Customs
- Local income taxLocal income taxThe Scottish Government planned to bring forward legislation to replace the council tax with a local income tax , as part of the funding for Scottish local authorities....
- Scottish Consolidated FundScottish Consolidated FundThe Scottish Consolidated Fund is the main fund operated by the Scottish Parliament. It receives a block grant from the UK Parliament's Consolidated Fund plus the operational receipts of the Scottish Government...
- Taxation in the United KingdomTaxation in the United KingdomTaxation in the United Kingdom may involve payments to a minimum of two different levels of government: The central government and local government. Central government revenues come primarily from income tax, National Insurance contributions, value added tax, corporation tax and fuel duty...