Scottish taxpayers could face a financial bombshell running to hundreds of millions of pounds if Holyrood decides to follow Westminster's lead on balancing the books.
Last month, UK Chancellor Jeremy Hunt outlined a number of eye-watering tax increases in the Budget.
Speculation is now mounting that Scottish Finance Secretary John Swinney is planning similar measures in a bid to bring in much-needed extra cash at a time of soaring inflation. A think tank has now outlined changes he could make on taxation to raise an extra £450million a year, though he will face fierce opposition from political opponents and the business sector if he chooses to go down that path.
The IPPR think tank says £380million could be raised annually if the Scottish Government matched the chancellor's decision to reduce the threshold at which people have to pay the highest rate of tax to £125,140, and also froze the higher rate thresholds. Going further, and lowering the top rate threshold to £100,000, could bring in an additional £70million a year on top of this.
Dave Hawkey, a senior research fellow at IPPR Scotland, talked up the benefits of such changes: "Not only can the measures we've outlined help fund the Scottish Government's pledge to safeguard households struggling to make ends meet in the immediate term, but they can also help to meet their long-term ambitions around ending child poverty and taking the first steps towards its commitment to develop a minimum income guarantee."
But such drastic tax moves would further alarm the under-pressure Scottish business community, which is already struggling with massive energy bills and the impact of the cost-of-living crisis. Many firms are also fearing that they will see big rises in their rates bills next year.
Scottish Budget day
Mr Swinney will deliver the Scottish Budget on Thursday, December 15, when we will learn his intentions on tax and business rates.
The Scottish Tories have urged him not to impose punishing tax rises which would widen the gap with other parts of the UK and potentially put more pressure on family finances.
Liz Smith, finance spokesman for the Scottish Conservatives, told the Daily Express: "The global energy crisis and rising inflation are having a challenging impact on public spending.
"However, the Scottish Government is set to receive an additional £1.5billion in Barnett Consequentials over the next two years and it is vitally important that this money is spent wisely to bring much-needed economic growth to Scotland.
"Scotland is already the highest-taxed part of the UK for over a million workers. This is a huge disincentive for anyone wanting to live and work here.
"We should be doing everything possible to minimise the tax differentials between Scotland and the rest of the UK. Allowing them to increase would have a damaging effect on Scotland's ability to be competitive with the rest of the UK."
- Meanwhile, Scotland's official public spending watchdog has warned that the SNP will have to raise taxes or cut public services to meet the significant pay demands of nurses and teachers.
Stephen Boyle, the auditor general, said ministers had already made "hard choices" to find an additional £1.2billion this year - and even this might not be enough to stay out of the red.
He confirmed to the Times that the Scottish Government was already facing the first budget overspend in the history of the Scottish parliament.