/Tax doesn’t have to be taxing

Tax doesn’t have to be taxing



(Title Image: BBC Wales)

The Issue

Tax devolution is not just happening on paper but will become reality in the next few months. In addition to those taxes that have been specifically devolved to Wales – like stamp duty – the Senedd will be able to create completely new taxes within devolved areas (subject to the UK Government’s permission).

As part of the 2018-19 budget, four new taxes were proposed including a tax on single-use plastic and a more controversial “tourist tax”. The Senedd recently voted to keep its mind open on new taxes, but UKIP took the opportunity to call for a halt on the idea completely.

The Motion

The Senedd:

  • Believes that introducing new Welsh taxes without the consent of the electorate will damage the reputation of both the Welsh Government and National Assembly for Wales.
  • Believes that UK and Welsh taxes are high enough already, stifling entrepreneurship and growth and squeezing the budget of those on low incomes.
  • Calls on the Welsh Government not to prioritise research into new Welsh taxes but to pursue improved economic growth and the creation of well-paid jobs.

Key Points

Neil Hamilton AM (UKIP, Mid & West Wales)
For (the motion): Taxes shouldn’t be used to influence behaviour.

  • Agrees with tax devolution, particularly the prospect of abolishing air passenger duty or cutting corporation tax in future, but finds it hard to get excited about the prospect of new taxes.
  • The tax system shouldn’t get in the way of wealth creation; the tourist tax proposal has been widely condemned by those involved in the industry.
  • Minimum alcohol pricing is “an equivalent to a tax”; the proportion a consumer pays for alcohol in the UK is already high compared to the rest of Europe.
  • Wales should become an internal tax haven within the UK.

Steffan Lewis AM (Plaid, South Wales East)
Against: Taxation leads to a grown-up government.

  • Taxation policy is a huge step forward after 800 years without the right to vary taxes at all.
  • Taxation strengthens democracy because the Welsh Government has to take it into account when coming up with policies or laws.
  • Plaid Cymru supported a sugar tax when it was unpopular but is now welcomed by other parties and set to be introduced by the Conservatives.

Nick Ramsay AM (Con, Monmouth)
Against: Taxes can be a useful tool when used wisely.

  • It’s right to say there should be more focus on economic growth, but the Conservatives have backed tax devolution to increase accountability.
  • The Welsh Government is completely within its rights to consider new taxes, but it has to balance the potential harm and good done to the economy.
  • Tax revenues can support borrowing for capital projects.
  • The electorate gives their consent during an election; there doesn’t need to be a referendum.

Caroline Jones AM (UKIP, South Wales West)
For: Lower taxes to encourage employers to relocate here.

  • UKIP would prefer lower taxes on businesses to encourage large employers to move to Wales; due to tax compliance measures that were taken against big tech companies by the EU, post-Brexit Wales could encourage them to move here.
  • All of the taxes proposed by the Welsh Government have problems.

Mark Reckless AM (Con, South Wales East)
Mixed views

  • The Welsh Government should reconsider their approach to land value tax after the Budget announcement in England on stamp duty.
  • It’s better to expand the tax base and keep taxes low.

Mike Hedges AM (Lab, Swansea East)
Against: Taxes pay for public services.

  • Too many people think we can have the public services of Scandinavia with the tax rates of the United States.
  • The more difficult a tax is to avoid, the less popular it is with the rich and powerful.
  • Tourist taxes are common around the world; he’s paid them himself without realising.

Welsh Government Response

Finance Secretary, Mark Drakeford (Lab, Cardiff West)

  • Neil Hamilton was once supporting tax devolution and accountability, but within five months that has turned into complaints.
  • Plenty of “experiments” since devolution are now amongst the public’s most popular policies; it doesn’t damage an institution’s reputation to discuss ideas. The UK Chancellor has taken up two of the Welsh Government’s ideas in the space of a few days – a plastic tax and a vacant land tax.
  • There’s no evidence that lower taxes boost economic growth.

Vote

The UKIP motion was deleted and replaced with a motion flipped 180 that supported the principle of introducing new taxes. This was voted through by the same result: 42 votes to 5.