Majority of Scottish business owners against income tax increase, says FSB

The business group has written to Finance Minister Derek Mackay with their results ahead of this week’s Scottish Government budget.

The survey of 315 business owners conducted in November shows that about three fifths of the sample (58.3 per cent) want income tax rates to stay the same, about a fifth (20.7 per cent) want tax rates to decrease, while a similar proportion (21.0 per cent) want them to increase. Asked what would be the consequence of an increase in income tax, about two thirds (65 per cent) said it would be detrimental to the economy, while a sixth (18 per cent) thought it would give the economy a boost. A similar share (17 per cent) suggested it would have no impact.

Andy Willox, FSB’s Scottish policy convenor, said: “A clear majority of those that run their own business in Scotland don’t want the Finance Secretary to increase income tax rates. Those asked warned of the impact on the wider economy, and little wonder with pressure on household incomes and uncertainties about the impact of Brexit.”

Asked to choose between the four options outlined by the Scottish Government in relation to income tax – where every option would see income tax revenue increase – just under half of all business owners preferred a tax regime with the largest number of bands and rates.

About a third preferred the option where rates were hiked for high earners and a tenth preferred a hike for mid and high earners. Just seven per cent of respondents preferred the option where a small number of additional rates were added.

The research also suggests that, of those that run their own business, about two thirds (64.8 per cent) are basic rate taxpayers and earn between £11,501 and £43,000. About a fifth (22.5 per cent) earn between £43,001 to £150,000 and only 1.6 per cent fall into the additional rate bracket by earning more than £150,000 per year.

Mr Willox said: “This data scotches the myth that business owners are all high earners. Further, when forced to choose between Ministers’ palette of tax options, the largest share of business owners chose what could be regarded as the more progressive option.

“They seem to be less worried about their own wallets and more concerned about the wider economy.

“That’s why, overall, smaller businesses don’t want to see tax change. As FSB warned ahead of the UK Budget, trading conditions are already turbulent, and additional tax hikes – for them or their customers – are not what we need right now. The Scottish Government must resist the siren song of a big change budget, and do what they can to steady Scotland’s economic ship.”

In their correspondence to the Cabinet Secretary, FSB also makes the case for action to make the Scottish non-domestic rates system more user-friendly as well as a comprehensive plan to improve local infrastructure including roads and broadband. The campaign group further argues that income from the apprenticeship levy should be used to help smaller firms build their teams’ skills.

Mr Willox said: “The Scottish Government must squeeze every drop of value out of existing budgets. That’s why it is important that plans are developed to ensure their spending power delivers for Scotland’s local economies. Addressing Scotland’s patchy local infrastructure network would be a good place to start.”

A Scottish Government spokeswoman said: “Our income tax discussion paper outlined four key tests that we feel any change in income tax must meet. One of those was that, when combined with our spending decisions, any change in tax policy should support the economy.

“Following this careful and considered discussion, we will publish a balanced package of tax and spending proposals as part of the draft budget on 14 December.”