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Unformatted text preview: the basic rate (23% in 1999-00, 22% in 2000-01) started at £1,500. Treasury (1999b, p. 99) stated: ‘Effects on the
Scottish Parliament’s tax varying powers – statement regarding Section 7b of the Scotland Act 1998: After the changes…, a one penny change in the
Scottish variable rate in 2000-01 could then be worth approximately plus or minus £230 million, compared with plus or minus £180 million prior to
these changes. In the Treasury’s view, an amendment of the Scottish Parliament’s tax-varying powers is not required as a result of these changes’.
The Institute for Fiscal Studies (1999) showed that, until the top decile, the tartan tax would be progressive. On the considerations which led to the
tartan tax not being applied at the higher rate, see Heald and Geaughan (1997). 271 Commission on Fiscal Imbalance It is important not to underestimate the significance of the Scottish Parliament having full legislative control over local
government structure, finance and taxation. As shown in Section III, local government revenues implicitly finance a
part of devolved expenditure. The positions are less developed in Wales (where the National Assembly for Wales
controls the operation of the Welsh system but relies upon Westminster for primary legislation) and in Northern Ireland
(where most local government functions were taken into central government under direct rule, and where the
comparable taxes are lower); however, these positions might change. The constraint on change is political, not
technical, echoing the earlier observation that UK citizens have more enthusiasm for public services than for paying
taxes. The quickly reversed implementation of the community charge (ie poll tax) has accentuated political nervousness
about local authority taxes, business as well as personal, and more specifically about differences between tax rates in
Scotland, Wales and England. Two examples illustrate this point. Council (ie domestic property) tax valuations are still
based on April 1991 values. In September 2001, there was newspaper coverage of business opposition to the intention
of the Minister for Finance and Local Government in the National Assembly for Wales to go ahead with a proposal for a
supplementary (ie local authority) business rate in Wales, even though such a proposal, discussed in a September 2000
Green Paper (Department of the Environment, 2000), has been abandoned in England.
Control of the entire local government financing system is a major asset for the Scottish Parliament, especially when it is
noted that the Autonomous Communities in Spain are bypassed by the central government in Madrid which deals
directly with local authorities. In contrast, central government taxation (here referring to the direct activities of the
Scottish Executive) is not devolved, but central government charging policy is devolved.
The line between taxes and charges is an elusive one. Congestion-type taxes, such as motorway tolls, are those least
likely to provoke a reaction from the UK Treasury, which may even like the idea of the devolved bodies taking the lead in
such a policy area. Nevertheless, the withdrawal by the Scottish Executive of its own motorway toll proposals reemphasizes...
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