From April this year, the three rates of Welsh income tax will fall, in line with the system in Scotland.
The basic rate will drop from 20% to 10%; the higher rate from 40% to 30%; and the additional rate from 45% to 35%. The move will enable the Welsh government to set local rates that are then added to the basic rates.
Estimates have previously suggested that putting 1p (US$0.13) on income tax would raise between £200 million (US$260 million) and £210 million (US$273 million) in revenues. But in the Budget for 2019/20, which has now been approved by the Welsh Assembly, the rates remained the same as those across the rest of the UK.
According to Accountancy Daily, Ritchie Tout, vice-chair of Chartered Institute of Taxation’s Welsh taxes technical committee, said: "Changes to the income tax structure for high earners or businesses carry a significant risk that decisions on where to locate will be based on tax. This is a threat to Wales with our long and well populated border with England."
Increasing tax rates could lead to a reduction in the tax base due to “migration or a large dead weight cost with no guarantee that it will be offset by an increase in the tax base if the rates are reduced", he added.
Tout also suggested that the Welsh Assembly should consider a completely new approach to setting tax. "Today the Welsh Budget process looks primarily at expenditure whereas what will be needed in the future is a focus on the detailed technical issues and on revenue raising," he said. "This would be better dealt with in a Finance Bill process that scrutinises detailed technical changes.”
Such a Bill would likewise provide an opportunity to make wider changes to existing tax legislation. “A Finance Bill will be an opportunity to debate innovative new strategies for Wales," Tout said.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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A guide to Welsh taxation from April 2019
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From April this year, the three rates of Welsh income tax will fall, in line with the system in Scotland.
The basic rate will drop from 20% to 10%; the higher rate from 40% to 30%; and the additional rate from 45% to 35%. The move will enable the Welsh government to set local rates that are then added to the basic rates.
Estimates have previously suggested that putting 1p (US$0.13) on income tax would raise between £200 million (US$260 million) and £210 million (US$273 million) in revenues. But in the Budget for 2019/20, which has now been approved by the Welsh Assembly, the rates remained the same as those across the rest of the UK.
According to Accountancy Daily, Ritchie Tout, vice-chair of Chartered Institute of Taxation’s Welsh taxes technical committee, said: "Changes to the income tax structure for high earners or businesses carry a significant risk that decisions on where to locate will be based on tax. This is a threat to Wales with our long and well populated border with England."
Increasing tax rates could lead to a reduction in the tax base due to “migration or a large dead weight cost with no guarantee that it will be offset by an increase in the tax base if the rates are reduced", he added.
Tout also suggested that the Welsh Assembly should consider a completely new approach to setting tax. "Today the Welsh Budget process looks primarily at expenditure whereas what will be needed in the future is a focus on the detailed technical issues and on revenue raising," he said. "This would be better dealt with in a Finance Bill process that scrutinises detailed technical changes.”
Such a Bill would likewise provide an opportunity to make wider changes to existing tax legislation. “A Finance Bill will be an opportunity to debate innovative new strategies for Wales," Tout said.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
OTHER STORIES THAT MAY INTEREST YOU
A guide to Welsh taxation from April 2019
Ask the Expert: How do I prepare for the UK's new post-graduate loan?
HMRC personnel recognised in the UK's New Year's Honours List
