Richard Murphy: A distinctive Scottish tax system is key to the country’s future
I AM well aware that most people don’t like paying taxes. I could take it a step further and say that most people don’t like to think about taxes. Despite these two things, I suggest that those interested in Scottish independence really need to get over their discomfort on this issue and think about the tax system Scotland should have when given the opportunity to govern itself. -same.
This is a matter of particular concern to me at the present time. My transition paper on taxation in an independent Scotland has just been published by the Scottish Independence Convention. This is not the first time that I have written on this subject. I also did this for Common Weal in 2017. I accept in this case that I have an unusual interest in this issue, but I really hope that the independence movement will join me in thinking that it is important.
It must, of course, be important. The ability to tax is one of the most fundamental indications of the existence of a state. In a very real sense, taking control of its tax system will be what will define Scotland’s independence, just as taking control of its own money will also be part of this process.
READ MORE: Here are six steps an indy Scotland needs to take for a fair tax system
More than that, what I have long believed is that the tax is the most powerful tool a government has to influence the structure of society for which it is responsible on behalf of the people who elected it. This is what I described as “the joy of tax” in my 2015 book with that title. If so, making the tax system of an independent Scotland distinctly Scottish is essential in shaping the future of the country as a whole.
This is the subject of the article I wrote. A tax system works when it reflects the values of a company. If you look at the UK tax system as it is now, it is very obvious in whose interests it is designed. There is a massive bias within it towards the rich. Most of their sources of income – from rents to interest and dividends – are taxed at lower rates than earned income. Companies are also taxed at lower rates than those paid by most workers.
Oddly enough, those with wealth are also offered better rates of tax relief compared to those with average incomes. For example, many wealthy people get double the tax break on the pension contributions they make compared to what most workers receive, while the wealthy who can save part of their income as a pension. Capital gains get two annual tax breaks a year when all the rest of us only have one.
I do not think this reflects the values that will exist within an independent Scotland. I’m not suggesting for a minute that Scotland should penalize the rich. What I am suggesting is that Scotland will expect everyone to make an equal contribution out of the income they earn, which is not the case in the UK as a whole at the ‘actual hour. The redistribution of the Scottish tax burden will be essential to reflect the values of the country that Scotland shares, I think.
This, however, will require a radical overhaul of the way the Scottish tax system is to be run. At present, the UK tax administration, HM Revenue & Customs, is run as if it were a very large company. Its board of directors is dominated by people who also sit on the boards of these companies, and everyone is excluded. So I want to change that too.
I want a Scottish tax system that is accountable to the people of Scotland. I want to have a tax office in every major city in Scotland with well-trained, well-paid civil servants, whereas the current plan is that there won’t be a tax office north of Edinburgh or Glasgow. And I want these offices to help Scots pay what they owe for the benefit of everyone in the country – which is a critical part of making it where it wants to be.
Taxation can and will help build New Scotland in other words.