Business calls for clarity on corporation tax

The Scottish Chambers said the use of corporation tax as an economic tool was "limited"

Business leaders have called for more clarity over the Scottish government's demand for control over corporation tax.

The Scottish Chambers of Commerce has warned the move could be a "double-edged sword".

Corporation tax (CT) is a tax paid on the profits of companies.

The chambers said that such receipts were volatile particularly in tough economic times and business had yet to be convinced of the benefit.

Chief executive of the Scottish Chambers, Liz Cameron, said: "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."

'Basket of taxes'

She claimed that devolved control over taxes had not always served Scottish business well pointing to the scrapping of transitional relief on business rates, designed to help companies cope with large increases in their rates bill.

"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," she said.

A Scotland Office spokesman said: "It is clearer than ever, particularly given the negative effects on business of the Scottish government's spending review this week, that any argument for the devolution of corporation tax or other powers must be based on strong evidence."

A Scottish government spokesman said: "A more competitive rate of corporation tax can boost growth, investment and employment. As a result, the tax base would expand in Scotland, leading to the generation of extra revenue and jobs."

The Scottish government has calculated that reducing the headline rate of CT from 23% to 20% would create an additional 27,000 jobs in Scotland over 20 years.

Despite its concerns over corporation tax, the Scottish Chambers pledged to take an "open and pragmatic approach" to devolution, and "engage positively" with MSPs when it appeared before Holyrood's Scotland Bill Committee on Tuesday.