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Page last updated at 15:44 GMT, Sunday, 26 October 2008

Swinney - 'I'm considering a U Turn'

Scottish Parliament with the H M Customs letter

The Politics Show has learned that the Scottish Government has been looking at whether or not to extend its plans for a local income tax to cover investments as well as earned income.

The SNP's consultation process on their plans for a local income tax closed in July 2008.

The proposals included a 3% rate on earned income. But "savings and investment income" was explicitly exempted.

However, using the Freedom of Information laws, the programme uncovered e-mails sent from the Scottish Executive to Her Majesty's Revenue and Customs in September.

On 23 September 2008, an official working at for the Scottish Executive wrote to HMRC:

"You may remember that I got in touch with you over a year ago requesting information on... how much revenue we could raise from the Local Income Tax...

...we are now trying to assess how much money could be raised from investment income if a LIT was applied to this".

You can read the documents in full here:

Most computers will open PDF documents automatically, but you may need to download Adobe Acrobat Reader.

The leader of the Labour Party in Scotland, Iain Gray, said: "I think what they show is the desperate trouble that this discredited local income tax policy is in.

"Were they to try and levy the income tax on dividend income, that would be a huge U-turn."

Scotland's Finance Minister, John Swinney, confirmed that he was now considering extending local income taxes to investments such as share dividends.

He told the Politics Show: "I'm very happy to confirm that and if we decide to do this in due course and we all want to call it a U-turn, then I'll call it a U-turn, I'm not fussed about that.

"But what we are doing is going to through a genuine process of listening to the feedback from the consultation."

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