Covid recovery and Brexit “perfect storm” to devolve VAT, says Reform Scotland
Reform Scotland, the independent, non-partisan think tank, says that the end of the UK’s Brexit transition phase tomorrow has removed the final barrier to passing control over VAT to Holyrood, and calls for its devolution to aid next year’s recovery from Covid 19.
Proposals to devolve VAT were discussed by both the Calman and Smith Commissions, and were supported by the Scottish Conservatives during the latter. However, the step was prohibited by EU law, which prevents variation in sales taxes within an EU state.
With the Brexit transition phase due to end tomorrow, there is now no block on VAT being devolved. This would give the Scottish Government an extra tool in its efforts to generate the economic growth the nation needs to climb its way out of the Covid-related downturn.
“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.
“With Brexit and our departure from the Common Agricultural Policy, we must now get serious about how we manage and support rural Scotland to everyone’s benefit.
“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.
“Scotland has never needed fiscal tools more, as we try to recover from the economic problems caused by the Covid pandemic. There is now nothing stopping the devolution of VAT.”.
NOTES TO EDITORS
- Reform Scotland’s most recent report calling for VAT to be devolved, Unfinished Business, can be read here.
- Reform Scotland is Scotland’s independent, non-partisan think tank, with a commitment to:
- Increasing prosperity
- A positive climate for entrepreneurs and innovators
- Reform and modernisation of public services
- Widening opportunity for all
- Compassion for those who slip through the cracks
- Greater courage and appetite for risk among policy-makers.
- For media contact Message Matters (Andy Maciver, 07855 261 244, [email protected]
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