Nicola Sturgeon discusses her tax returns in January
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Nicola Sturgeon’s tax plans will push richer Scots over the border to England, a research institute has warned. The Institute for Fiscal Studies (IFS) said that the planned alterations in Scotland would hit higher earners hardest and lead them to look elsewhere for more lax arrangements. Business leaders have also warned the law, which will likely pass the Scottish Parliament today, could deprive Scotland of a competitive edge against England.
The latest report from the IFS states that Ms Sturgeon has turned to higher earners’ incomes to fund her policies.
Proposed tax reforms aim to take the burden off Scotland’s lowest earners, ensuring they receive hundreds more pounds per year.
People earning below £28,000 would see their incomes raised by 4.6 percent from April, giving them an additional £580 per year.
Those on an income of £50,000 would pay an additional £1,550, while six-figure earners on £150,000 lose £3,900.
The progressive taxation method has seen support in Scotland, but the IFS report has warned it could prove costly for Ms Sturgeon.
Author Tom Wernham, an IFS research economist, warned that targeting the group would lead people to look for ways to avoid the government’s laws.
He said there was a “risk” that higher takes would “incentivise tax avoidance efforts”.
Mr Wernham said higher earners may convert their income into dividends, something Scotland doesn’t tax.
Otherwise, he added, they may consider “migrating across the border”.
The latter option could ultimately cost the Sturgeon government more than just the tax hike amount.
Tom Waters, another author, said Scotland is particularly at risk of emigration.
He said it is considerably easier for people to move over the border and ultimately take their money to England or Wales.
Mr Waters said: “When someone does migrate, the Scottish government loses all of the income tax they would have received from them.
“It’s not just the extra few thousands they’re paying in Scotland.”
While the IFS has criticised aspects of Scotland’s plans, the institute praised the country’s tax banding and welfare policies.
Mr Wernham said the Sturgeon government has “made the system more progressive” and that the “devolved income tax and benefit policy” would improve lives over the border.
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