| Taxation in Scotland |
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| National Taxation |
| Local Taxation |
Taxation in Scotland today involves payments that are required to be made to three different levels of government: to theUK government, to theScottish Government and tolocal government. Currently 32.4% of taxation collected inScotland is in the form of taxes under the control of theScottish parliament and 67.6% of all taxation collected in Scotland is reserved to the UK Parliament.[1]
Until the 17th century, taxation was regarded as 'an extraordinary source of revenue that was levied for a specific purpose such as the defence of the realm'.[2] However, during the 17th century,Parliament permitted a Land Tax to be collected from 1667, aHearth tax from 1691 to 1695 and aPoll tax from 1693 to 1699.[3]
The 1707Union of theKingdom of Scotland with theKingdom of England formed a newKingdom of Great Britain, so that responsibility for taxation in Scotland became a matter for theWestminster Parliament, now the legislature for the new state.
The creation of a devolved Scottish parliament in 1999 was accompanied by a limited transfer of taxation powers: theScotland Act 1998 transferred the power to legislate for local taxation and alsothe power to vary income tax by plus or minus 3 pence in the pound. Most taxation powers in Scotland following the creation of the parliament remained a reserved matter for Westminster. Following theCalman Commission, theScotland Act 2012 transferred powers overStamp duty Land Tax, andLandfill Tax (both since replaced byLand and Buildings Transaction Tax andScottish Landfill Tax, respectively) and reduced rates of Income tax in Scotland by 10 pence in the pound at all bands, reducing theBarnett formula by the equivalent sum, and requiring the Scottish parliament to set a Scottish Income tax rate to replace the lost revenue but with the ability to set it higher or lower than 10 pence in the pound if it wished.
Following promises made during theScottish independence referendum that led to theSmith Commission, theScotland Act 2016 added powers overAir Passenger Duty and full control over Income tax on non savings and non dividend income (excluding the personal allowance which is still set by the UK parliament.)
Despite these tax powers having been transferred, over half of all taxes collected in Scotland remains under the direct control of the UK parliament which has remained a reserved matter to itself all powers overCorporation tax,National Insurance,Value-added tax (VAT),Capital gains tax,Inheritance tax,Aggregates LevyInsurance Premium Tax andMotoring taxes.[4]
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