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[ 26-09-2011 ]

Scottish Chambers of Commerce (SCC) have today (Monday 26 September) indicated that they are supporting a constructive debate on the possible devolution of Corporation Tax to Scotland.  Publishing their evidence to the Scottish Parliament’s Scotland Bill Committee on Corporation Tax (CT), SCC are adopting an open and pragmatic approach to the devolution of the tax and are posing a number of questions that need to be answered as the debate progresses.  Launching the consultation response, Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said:
“The ongoing debate over the Scotland Bill and what additional powers, if any, are needed to ensure Scotland’s long term economic success has been a well trodden path in recent years.  At Scottish Chambers of Commerce, we have been engaging with our members across Scotland regarding their priorities for devolving powers to a more local level.  We have already adopted positions in favour of the devolution of Air Passenger Duty and additional borrowing powers for the Scottish Parliament but the devolution of Corporation Tax has generated a large measure of discussion. 
“Our members have told us that low business taxes are important to them, and they are also key to attracting new businesses to invest in Scotland.  Corporation Tax is an important example of this but there are also other taxes which fall into this bracket, including Income Tax, payable by sole traders and partnerships, and Business Rates, which are already within the control of the Scottish Government. Corporation Tax is not paid by all businesses – generally speaking it tends to be the largest and most profitable – and it is a tax on profits, so its use as an economic tool to boost existing businesses is limited.  Chambers’ members have called on the Scottish Government to use the economic levers already at its disposal to optimum effectiveness, boosting economic growth through public sector procurement, planning improvements and infrastructure investment.  Even without extra fiscal powers, businesses argue, more could be done to promote growth.
“It is also important to remember that whilst much of the debate around the devolution of CT has focused on the ability to reduce the tax, the fact is that tax rates could rise as well as fall.  In terms of Business Rates, Scottish firms last year lost their entitlement to transitional relief, which firms south of the border continue to enjoy, and we have recently seen plans to increase non domestic rates further for still more businesses, so devolution can be a double edged sword.
“Further thought must also be given to the volatility of CT as a revenue raising tool.  Over the last five years, during which Scotland was subject to a deep recession, Government estimates of CT generated in Scotland vary by a margin of up to £1 billion per year, potentially creating a headache for government in planning its spending.  It is clear that Scotland ought not to be subject to an over-reliance on any one tax and CT would have to be part of a basket of devolved taxes to come under the remit of the Scottish Parliament.
“We need to get decisions on Corporation Tax right.  It is too early to rule it in or out as an option and we are keen to work with the Scottish and UK Governments to help address our members issues.”

SCC Submission on Devolution of Corporation Tax