Shadow Minister for Finance Mark Isherwood MS has challenged the Welsh Government over its taxation decisions which he said have had a detrimental impact on the Welsh economy.
Responding to yesterday’s Statement by the Minister for Finance and Trefnydd on ‘Progress on Devolved Taxes’, Mr Isherwood challenged the Minister over the Welsh Government’s decision to enable Local authorities in Wales to levy council tax premiums on second homes, its increased ‘Land Transaction Tax’ Higher Rates, and its plans for a Tourism Tax.
He said:
“Wales has retained the highest poverty and lowest pay rates of all the UK nations, and even before coronavirus, almost a quarter of people in Wales were in poverty, ‘living precarious and insecure lives’.
“Does the Minister recognise that Wales needs to attract both inward and internal investment, and high skill, high added-value jobs in small, medium and large enterprises?
“If so, does she recognise that there can be an inverse relationship between tax rates and tax revenues - and that using the system to incentivise economic activity can ultimately generate more revenue for public services?
“How does she respond to the findings of Cardiff University Academics in the first year of this Senedd term, that cutting the top rate of income tax would ultimately raise tax revenues by encouraging wealth creators to help grow the Welsh economy?
“The Housing Act (Wales) 2014 added discretionary powers for local authorities to apply Council Tax premiums of up to 100% to second homes.
“As I warned at the time, this would not generate additional supply for people who need affordable homes in their communities, and that ‘enabling Local Authorities to charge Second Home Owners additional Council Tax would risk unintended consequences’.
“What evidence does she therefore have to support the Welsh Government’s claim that enabling Local authorities in Wales to levy council tax premiums on second homes is using taxation to ensure a fair contribution, when the sector has instead made clear that this simply prompted many who had not known they were already eligible for small business rate relief to switch from Council Tax to this, and others to start letting out their homes and register for small business rate relief to help with costs - in accordance with Welsh Government criteria last revised and strengthened in 2016, and policed by the independent Valuation Office Agency?”
Challenging the Minister over the Land Transaction Tax, he said:
“Why does the Minister state that “Wales also has the highest thresholds at which businesses need to pay tax on non-residential property transactions in the UK”, when the Welsh Government’s increased ‘Land Transaction Tax’ Higher Rates - which hit large numbers of legitimate small and medium sized businesses, many of them with properties near the internal UK border with England – are higher than equivalent ‘Stamp Duty Land Tax’ Higher Rates in England for purchase prices up to just £125,000, and higher than for all purchase prices in England above just £180,000, even after the higher rates holiday introduced by the UK Government in response to the Covid pandemic come to an end?
“The Minister also refers to the potential for a Tourism Tax. How will she ensure that objective consideration is given to the overwhelming evidence from the sector that this would be damaging to tourism in Wales, that this would be damaging to investment, damaging to jobs, and would ultimately reduce the tax take receipt by the Welsh Government?”.
