Taxation – Scots workers face extra tax

Workers in Scotland face extra taxes to support an ageing population as the size of its workforce shrinks rapidly, a Price Waterhouse study has claimed.

Dermot Graham, PW’s senior actuary in Edinburgh, noted two interrelated problems facing Scotland’s workers over the next two decades.

Government figures forecast a decline in the Scots population from 5.12m to 4.99m by 2021. The population’s age structure over that period will also change markedly, with under-15s reducing by 15% and the over -60s rising by 30%.

Graham said: ‘A shrinking workforce will have to support an increased health-care provision for the elderly, which must raise questions about the level of taxation those in employment may have to face.’

Pension provision adds to the problem, Graham said, with the burden of providing pensions for rising numbers of elderly recipients falling on a smaller number of contributors.

‘This points to an increased need for personal provision,’ added Graham.

‘Allied to the greater requirements to support health-care provision through taxation, this means those in employment during the next 25 years are likely to face substantial outgoings in these two areas.’

The only solution, Graham suggested, is to reverse the migratory pattern of Scottish youth. He concluded: ‘It’s more likely we’ll see a mind-set change, with younger workers providing more for their own old age, at the same time as financially supporting those already retired,’ he said.

Related reading