Darling Blasts Proposals For Local Income Tax In Scotland

by Jason Gorringe, Tax-News.com, London

29 October 2008

Alistair Darling joined the debate over the Scottish National Party’s (SNP) plans to introduce a local income tax in Scotland during a rally in Glenrothes on Monday, branding their plans “ridiculous.”

He was one of several high-profile visitors to the constituency trying to gain votes in the crucial by-election to be held on November 6.

Alex Salmond, SNP leader and the First Minister of Scotland, has proposed to replace council tax with a local tax on workers, set by councils, up to a limit of 3p in the pound.

The Chancellor stated that the idea “would be extremely damaging for Fife, extremely damaging for Scotland, extremely damaging for jobs and it should be rejected.”

He added: “The Government, Scottish government and councils should all be working to do everything we can to help people through undoubtedly a very difficult time."

According to the SNP, their plan to replace council tax with a local income tax would bring about “the biggest tax cut in Scotland in a generation” with those on low and middle incomes better off by an average GBP350 to GBP535 a year. The Party claims that more than four out of five households will be better off, or no worse off, under a local income tax.

Under the proposed system, the 3% rate would be applied to income tax that is subject to both basic and higher rates of tax in the UK, and the tax-free personal allowance (currently GBP6,035) would also equal the wider UK allowance. There would also be a tax on second homes broadly along the lines of the current council tax system. However, savings and investment income would be exempt from the local income tax, a proposal that critics of the plan argue would let the well-off escape local taxation on a substantial portion of their total income.

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