17-07-2025
- Business
- The Herald Scotland
So you want progressive taxes, SNP? Fine: start with a land tax
Stories about wealthy people fleeing to avoid taxes are scarcely a novelty. Some of Scotland's most feted thespians and entrepreneurs have been following that route for decades. The others seem to have survived and feel no envy for the departed brethren, boring each other in sun-kissed places.
The 'scare story' keeps running, however, as a deterrent to any government initiatives which might inconvenience the greediest. Never mind that it was Brexit which prompted more such departures than anything else. According to the Tax Justice Network, an average of 30 press articles a day appeared about 'the non-existent millionaire exodus in 2024', fed by lobbyists hired to promote the fiction.
Read more by Brian Wilson
In fact, many wealthy people want to do the right thing, particularly if they have acquired that status by creating businesses and employment to match. A fractional increase in taxation is not going to send them scurrying for their passports. As entrepreneurs, they are likely to be more concerned about the impact of business taxes than personal ones.
The old statistic which gave rise to a theatre company, when seven per cent of the people owned 84 per cent of the wealth, is seriously in need of updating. Now, the richest one per cent own more wealth than the bottom 70 per cent while, according to Oxfam, billionaires pay 'effective tax rates close to 0.3 per cent of their wealth'.
It's a pretty compelling case for starting to redress that gross imbalance while also contributing a few billion to the public finances, but it won't happen overnight or by grand announcement. Putting in place new structures which would be fair and effective, without unintended consequences, will be extremely complicated and take time, in the teeth of fierce resistance. That doesn't mean it shouldn't be embarked upon.
Where better to start than in Scotland, which should be looking creatively at its own revenue options, beyond ritual moans about not being sent enough money or by raising income tax rates for people who are not at all wealthy. The number caught in Scotland-only higher tax rates has almost doubled in three years to over 700,000 and that particular well is running dry. People don't need private jets to escape a 48 per cent rate of income tax.
The Scottish Affairs Select Committee at Westminster delivered a report this week which said the Barnett Formula is working well for Scotland and also that the Scottish Government should have more borrowing powers. I endorse both conclusions, but we can surely be more progressive than that?
As one would expect, the SNP's contribution to the committee's work was based on their constitutional objective under the guise of Full Fiscal Economy, which nobody – including themselves – takes seriously. They just feel obliged to keep making that noise while, in real life, taking the money Barnett delivers, even more generously since the election of a Labour government.
The area in which a radical Scottish Government could do immediate work is by replacing the council tax which is a regressive system introduced by the Tories in 1991 and causes no inconvenience whatsoever to the wealthiest in the land, particularly if their wealth is related to that very commodity – land.
Eight years ago, SNP ministers asked for a report from their own Land Commission on the option of a Land Value Tax. In theory, this should be attractive to them because it plays into other stated objectives on which, otherwise, nothing is happening – land reform through greater diversity of ownership, land being freed up for housing, derelict land being brought into use, and so on.
The Land Commission spelt out potential benefits of a Land Value Tax. 'Aside from raising revenue, one of the main theoretical benefits of land value taxation is that it should encourage land to be used more productively. This is because it is based on the value of land in its optimum use as opposed to its actual use.
'Taxing land value should also be an efficient approach to taxation because the supply of land is relatively fixed so taxing it should not affect supply. Whereas income taxes reduce incentives to work and corporation taxes reduce incentives to invest, taxing the value of land should not affect the amount of land available'.
Funding arrangements for the Scottish Parliament are again under review (Image: Newsquest)
For good measure: 'Taxing land is also attractive for administrative reasons because land cannot be moved so land value taxes should be difficult to avoid or evade.' At the end of all that, one wondered: 'What is there not to like?'.
To be fair, the Commission added the caveat: 'The research did not find unequivocal evidence that proves they definitely deliver the various benefits often claimed of them. Any further steps toward implementation must therefore be taken with caution.'
That was the get-out clause which the Scottish Government gratefully accepted. Whereas there is 'unequivocal evidence' that the existing system is deeply regressive, leaves large areas of Scotland untaxed and local government near bankrupt, there is no 'unequivocal evidence' that trying something else might produce better results. So after 18 years of SNP government, the Tory solution of 1991 – based on not offending the wealthy – remains undisturbed.
Under the devolution settlement, the Scottish Government could only apply radical reform to funding councils rather than to national taxation. But it would be a start which would signal a genuine commitment to redistribution.
And maybe if they tried it, working closely with the UK Government, it could become not just the most radical and interesting outcome Holyrood has ever delivered, but also a stepping-stone towards delivering a fairer tax system for the whole country. Or is it easier just to shout 'wealth tax' while avoiding even the smallest advance towards that objective?
Brian Wilson is a former Labour Party politician. He was MP for Cunninghame North from 1987 until 2005 and served as a Minister of State from 1997 to 2003.
