(Chancellor Alistair Darling speaks out against the plans whilst campaigning in Glenrothes)
The SNP government is investigating how to tax unearned income in a change to flagship plans to replace the council tax, it was revealed today.
Finance secretary John Swinney confirmed the policy shift to the proposed local income tax, a levy capped at 3p in the pound.
He told the BBC's Politics Show: "We're certainly considering that as an option, 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, I'll call it a U-turn. I'm not fussed about that."
Mr Swinney also indicated he could allow councils to vary the charge down from the 3p limit.
He said the potential change was sparked by public consultation exercises.
And he said there was a "strong argument" to exempt students from the charge.
"We're a government that has to listen to the views of other parties because we operate in Parliament without a majority, so we've got to find a way of building consensus," he said.
The change of policy emerged in emails released to BBC Scotland's Politics Show under freedom of information legislation.
Officials wrote to HM Revenue and Customs seeking information on how investment income would affect the proposed tax.
In an email dated September 23, a Scottish Government official wrote: "You may remember that I got in touch with you over a year ago requesting information on Scotland for analysis we were carrying out re how much revenue we could raise from the local income tax.
"Following on from that we are now trying to assess how much money could be raised from investment income if a local income tax was applied to this."
The government previously decided it would be too costly and time-consuming to tax unearned income.
The move was criticised over concerns the richest would exploit the loophole by taking more dividends and pay less for local services.
Mr Swinney's indication that councils could vary the level is considered key to winning Liberal Democrat support, who approve of local income tax in principle.
Labour finance spokesman Andy Kerr said: "The SNP won't get their new tax through Parliament unless they can do a back room deal with the Liberal Democrats, who will serve as the hand maidens to a policy disaster even worse than the poll tax.
"The idea that to appease the Liberal Democrats we could have 32 different rates of income tax, one for each local authority, is madness. It will impose a massive new burden on employers."
The party's leader at Holyrood Iain Gray told the Politics Show: "Were they to try and levy the income tax on dividend income, that would be a huge U-turn from what's always been said before.
"Although it's not the U-turn we really need because it wouldn't address the fundamental flaw in this policy, that it's bad for working families because they'll pay more."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article