Reform Scotland, the independent non-party think tank, says that the UK’s exit from the EU has removed the major block on devolving VAT to Holyrood.
The call has been made in a new research paper – Unfinished Business – released today.
VAT devolution, which was discussed by both the Calman Commission and the Smith Commission, and supported by the Scottish Conservatives, was prohibited by EU law, which prevented variation in sales tax within an EU state.
However, Brexit means that this can now be done, and Reform Scotland has called on Chancellor Sajid Javid to heed the word of his Scottish colleagues and devolve VAT to Holyrood.
In its Smith Commission submission, the Scottish Conservative Party said: “Were it not illegal under EU law, we would have been inclined to recommend that VAT be devolved to the Scottish Parliament.”
Commenting, Chris Deerin, Director of Reform Scotland, said:
“Holyrood is hugely reliant on a single tax – income tax – which accounts for almost two-thirds of its devolved revenue, compared to only one-quarter for the UK as a whole.
“As both the Calman and Smith Commissions noted, countries benefit from broader tax bases, and a broader tax toolkit, and our departure from the EU now provides the opportunity to reduce Holyrood’s dependence on income tax to less than 40%. This would be much more sustainable.
“The SNP would, we presume, support this, and the Scottish Conservatives are also supportive, unless their policy has changed since the Smith Commission.
“So we now call on the Scottish Conservatives to use their influence with Sajid Javid to secure the devolution of VAT in the Budget of March 11th, and complete the unfinished business of Calman and Smith. This would introduce a new era of flexibility, accountability and competitiveness to Holyrood.”