As the power to vary income tax rates in Wales applies only to non-savings and non-dividend income, we heard that Wales will be particularly exposed to taxpayers mitigating their liability through switching from earnings to other forms of income. For example, those who are self-employed could respond to tax variations by incorporating their business, in order to pay corporation tax on profits and dividend savings income tax on the withdrawal of profits, instead of paying the Welsh rates of income tax on self-employed earnings. So, we recommend that the Welsh Government commissions research into the impact of mitigating personal income tax through incorporation and changing forms of income, especially given that a significant proportion of higher and additional-rate payers are employed in the private sector in Wales, and therefore capable, of course, of incorporating their activities. We also call on the Welsh Government to give further consideration to seeking the devolution of savings and dividend income to Wales and to assess the benefits and risks of securing this power.

Finally, though we concluded our evidence gathering for this inquiry before the true extent of the COVID-19 pandemic was realised, it is clear that difficult decisions on taxation will need to be made in order to aid Wales’s economic recovery. The Welsh Government needs to consider all economic levers at its disposal, and we urge the Welsh Government to develop policy options for the Welsh rates of income tax and consider contingencies to deal with adverse economic conditions and possible cuts in public spending. So, with those comments, I look forward, Deputy Llywydd, to hearing contributions from Members.