Scottish taxes are progressive but complicated

The Scottish government has used its devolved tax and benefit powers to craft a more progressive system than is in place in the rest of the UK according to a new report from the Institute for Fiscal Studies (IFS). On average taxes are higher for high-income households and benefits more generous for low-income households.

However its five-band system of income tax is unnecessarily complex. It could have achieved similar changes in tax bills – indeed slightly more progressive changes – if it had introduced a small 0% band on top of the UK-wide tax-free allowance and applied its 21% ‘intermediate’ rate directly above that.

Low-income households gain much more from the Scottish government’s increases in benefits. These include a top-up to carer’s allowance more generous housing benefit and extra payments for families with young children on means-tested benefits.

A natural drawback of making the...