Proposals in the draft budget to introduce new starter and intermediate rates of tax, while increasing the amount to be paid by those in the higher brackets, would make the tax system more progressive, he told the Scottish finance and constitution committee yesterday.
“We have protected lower income earners through the starter rate – it’s not a massive reduction, but it’s structural change that benefits the majority of people, and lower earners primarily,” he said.
Questioned by members of the committee over why those earning between £33,000 and £43,000 would pay more tax next year than this year, while those earning between £43,000 and £58,000 would pay less, Mackay said this was an anomaly arising from structural changes to the system.
“This is resetting the tax system; this is structural change; this is delivering a fairer system overall,” he said.
He was also pressed over whether married couples in Scotland would lose out on tax relief of up to £260 annually under the plans.
Mackay said officials from the Scottish Government were engaging with HMRC on this issue, which could be resolved with “a minor technical change”.
Aidan Grisewood, deputy director for the Scottish Government’s fiscal responsibility division, said it was up to Westminster to take that change forward.
“The question is whether you stick to the letter around the basic rate, which means people on the intermediate rate lose that entitlement, or whether you take a pragmatic approach that avoids that eventuality,” he said.
In response to committee member James Kelly MSP (Lab), who described the tax proposals as “weak and coherent”, Mackay said that complexities were unavoidable in any change to the tax system.
“I don’t know of any commentator or economist who has said this is anything other than progressive,” he said.
“It is a major step in delivering a fairer structure…while raising extra resource for Scotland’s public services.”
