People could be offered tax breaks to live and work in Wales in an attempt to boost the country’s underdeveloped economy.
The Treasury is considering giving the Welsh Assembly taxation powers that enable them to vary the rates that apply to people in the country, allowing them to cut or raise taxes to encourage investment and make the country more competitive.
Andrew Davies, the leader of the Welsh Conservatives, will suggest in a speech tomorrow that his party would use the devolved powers to cut tax for those at the 40 per cent rate in order to boost the economy, according to The Independent .
Currently the British Government spends £18bn more a year on Wales than it gets back. Just one in 16 people earn enough to pay the higher tax bracket of 40 per cent.
Mr Davies is expected to say that tax is an “important lever” for the government and reducing taxation for those paying 40 per cent would “send out a strong sign to business in competing regions of the UK, but it would spell out that Wales is well and truly open for business".
The Government is currently considering the report by the Silk Commission which recommended that some tax powers, including stamp duty and some income tax responsibilities, should be devolved.
Tory party sources have said they are in favour of the move, echoing plans to give more power to the Scottish Parliament which are due to come into effect in 2016, it has been reported.
The source claimed that tax-raising powers would give Welsh politicians and incentive to grow and promote their economy without feeling they had relied on a hand-out from Westminster.
A spokesperson for the Treasury refused to comment on whether a decision had been made either way.
An opinion poll carried out by the Silk Commission found that 64 per cent of people living in Wales favoured income tax devolution, with 33 per cent against, and they felt it would make politicians work harder for the country.
There are 89,000 higher-rate payers seven per cent of all those in Wales who are responsible for approximately 33 per cent of all income tax revenue in the country, the HMRC estimates.
Only 4,000 people earn enough to pay the new 45 per cent tax rate.
The Silk Commission on devolution recommended in November (Xetra: A0Z24E - news) last year that the Welsh Assembly be given full powers over smaller levies, such as landfill tax, stamp duty, business rates and aggregates levy, while Air Passenger Duty should be devolved for long-haul flights initially.
It also said responsibility for income tax should be shared between Cardiff Bay and Westminster, although corporation tax should not be devolved unless that power is given to Scotland and Northern Ireland.
The report also made a number of recommendations in relation to borrowing powers, including the Assembly being able to borrow to support key infrastructure projects.