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UK Government Doubts Scottish Tax Promises

by Amanda Banks, Tax-News.com, London

20 December 2013


The UK Government has published a document claiming that key commitments made by the Scottish National Party relating to Corporation Tax and Air Passenger Duty in an independent Scotland are "unfunded."

The analysis has been published in response to the Scottish Government's Scotland's Future document, which promises to cut Air Passenger Duty (APD) by 50 percent and corporation tax by up to three percentage points should Scottish residents vote for independence next year. The UK Government maintains that the APD cut would require annual tax revenue or spending cuts amounting to GBP130m at today's prices by the end of the first Parliament, while a lower Corporation Tax rate would alone create a shortfall of GBP300m.

The UK Government further warns that a commitment to providing extensive childcare would raise the total amount to GBP1bn, while plans to return the Royal Mail in Scotland to public ownership and increase the National Insurance Employment Allowance cannot be costed due to lack of detail.

These policies are in addition to a set of spending commitments that the Scottish Government says it will fund through defence cuts.

The UK Government says that its figure on APD is based on a proportion of the latest national forecast by the Office for Budget Responsibility (OBR), while the corporation tax figure is derived from an HM Revenue and Customs UK-wide estimate using an approach that has been endorsed by the OBR.

Should Scotland not vote for independence next year, the Corporation Tax rate will continue to be set in Westminster, although there are plans to devolve some other tax-setting powers. However, the UK Government recently rejected devolution of APD and Corporation Tax in relation to Wales.

TAGS: tax | air passenger duty (APD) | corporation tax | United Kingdom | ministry of finance | tax rates | HM Revenue and Customs (HMRC) | HM Revenue and Customs (HMRC)

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