Writing in the last few days of March, and given the lively discussions over the past months you’d expect me to write about business taxation. However, I don’t intend (as you might expect) to write much about Business Rates as a tax. I’ll only say that the 2017 business rates revaluation (undertaken in 2015) has turned out to be a big issue primarily because it has highlighted that bad taxation can have a real impact on the economy and on companies that employ real people. That particular problem has far from gone away, the wound remains open with a small plaster applied.
Today I write about the Apprentice Levy, another business tax which creates another ‘useful’ case study of bad taxation. Now, the tax itself need not have been a bad thing, indeed a number of employers were actually supportive of the concept of the tax ie employers would pay a levy but would recover that when they took on apprentices. However, the application and planning for the implementation of the levy has exposed many issues with business taxation being partly applied by both UK and Scottish Governments.
I’ll start at the start…. remember Mr Osborne, ex-Chancellor now newspaper guy. He surprised us all announcing a new tax which would be payable based on payroll costs (failure 1). It isn’t unusual to get surprise taxes but it was very clear soon after there was no plan to actually implement the tax (failure 2). However, we were pleased the levy payments would be ring-fenced for training and skills as this would be good for the economy.
A while after this it became clear implementation would be different in Scotland and the rest of the UK (failure 3). The levy also then became part of the dreaded “it was Westminster” / “no its Holyrood” argument – the UK Government told us funding would come to Scotland broadly equal to the levy payments made in Scotland. Then the Scottish Government say no new money came to Scotland (failure 4). The importance of this is that the latter assumption has created a situation where no additional money is being invested in skills in Scotland (in our view failure 5). We say this because the skills budget is broadly the same.
The process has left businesses subject to “he said, she said” politics, thus exposing the challenges of policy implementation in devolved arrangements. However, most of all we consider a real opportunity has been missed to create a step change in our skills environment (failure 6). These are all shorter-term impacts but the process will sadly undermine further the trust that needs to exist between business and government to ensure long-term economic success.
James Bream is research and policy director at Aberdeen & Grampian Chamber of Commerce
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