FINANCE Secretary John Swinney today claimed Scotland could boost investment and grow the economy if control over corporation tax were transferred from Westminster to Holyrood.
He published a discussion paper setting out how the Scottish Government could vary the rate of the tax to attract new investment, cut tax bills for small businesses or offer tax breaks to companies that invest in research and development or green technology.
Excluding North Sea oil, corporation tax generated £2.6 billion in Scotland in 2009-10. Mr Swinney said control of the tax was a vital tool for increasing sustainable growth and would make Scotland more competitive.
The UK Government is already considering allowing Northern Ireland to set its own rate of corporation tax. It is claimed if the Northern Ireland assembly government were able to pre-announce a reduction in the corporation tax rate to 12.5 per cent, it would create 58,000 more jobs, increase living standards by 13.5 per cent and raise annual economic growth by one percentage point by 2030.
Mr Swinney said: “Scotland needs full control of the key economic levers to meet the specific challenges facing the Scottish economy. Control over corporation tax would enable us to boost investment, grow the economy and take the right decisions for Scotland.
“It doesn’t make any economic sense for a company in Stornoway to pay the same headline corporation tax rate as a company based in London.
“With control of corporation tax, Scotland could choose whether to operate a lower tax rate, vary the tax base, simplify the tax system or use corporation tax as a lever to encourage innovation and investment.”
He said full responsibility for corporation tax would give Scots a greater incentive to start their own business, provide Scottish firms with a competitive edge to help them grow and help raise the country’s standard of living.
Labour finance spokesman Richard Baker voiced scepticism about plans to lower the rate of corporation tax.
He acknowledged that if Northern Ireland was handed control of corporation tax, the case for Scotland having similar powers would be strengthened, but he claimed it could lead to different parts of the UK trying to outbid each other with no-one benefiting.
Mr Baker claimed corporation tax was “pretty far down” the list of criteria for companies deciding on investments.
He said: “The Scottish Government has not said how it could afford this measure, which could mean £2.6 billion coming off the budget.”