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Smith Commission recommends Scotland sets own income tax rates

SCOTTISH PARLIAMENT should have the power to set its own income tax rates and bands, the body investigating devolution has concluded.

The Smith Commission, set up by David Cameron following Scotland’s independence referendum, also recommended Edinburgh be assigned a share of VAT and the full devolution of Air Passenger Duty.

Scotland is already set to gain powers to alter the basic rate of income tax above 10p in the pound from 2016, and to take charge of some minor taxes such as stamp duty, under the Scotland Act 2012.

ICAS welcomed the move, praising Lord Smith for “cutting a brave path” with his proposals and noting the retention of the UK infrastructure of tax collection with HMRC and employers.

The institute’s director of taxation Elspeth Orcharton said: “The devolution of income tax rates and bands delivers an intelligent political result, balancing the vow to deliver greater control and accountability to Scotland, while remaining part of the United Kingdom. It requires the respective governments to consider for the first time the economic and budget mechanisms involved in such a significant transfer of powers.

“It allows the potential for a staged process to further tax devolution without system shocks or costs that a wholesale transfer might have brought.”

She added Air Passenger Duty could be devolved “quite easily”, acknowledging it “could then be reduced or abolished by a Scottish Parliament in the interests of economic stimulus”.

CBI director-general John Cridland described the move as a “watershed” for the UK, but warned devolution should not undermine the integrity of the internal market.

He said: “”Businesses on both sides of the border will welcome the Commission’s support for maintaining the key tenets of a UK single market. And with the vast majority of Scotland’s exports going to the rest of the UK, it is vital that businesses based in Scotland can operate without complexity across the UK regions and nations.

“Following many months of political uncertainty, the focus for all parties must now be on building a stronger and more prosperous Scottish economy.”

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