IAN RESPONDS TO CORPORATION TAX PROPOSALS

Standard

PROPOSALS to cut Corporation Tax in Scotland would be a multi-billion pound “gamble” that could set the Scottish economy on a downward spiral, warns Ian Murray MP.

Today the Scottish Government has released ‘Corporation Tax: Discussion Paper Options for Reform’. The report claims that setting an “attractive” corporation tax strategy could improve the competitiveness of the Scottish economy and support jobs.

But Ian – who ran his own business before being elected as Edinburgh South MP – believes the move could be hugely damaging.

He points to evidence that the move could cost the Scottish economy up to £2.6bn a year. And he has challenged the SNP to say how they would plug the financial black hole that a cut in corporation tax could create.

“Scottish Labour would not rule out any further devolution of powers to the Scottish Parliament – if it can be shown to be of benefit to the Scottish People,” said Ian.

“But despite having ample opportunity the SNP has repeatedly failed to deliver any evidence that a cut in Corporation Tax would be good for Scotland.

“In fact, figures suggest that a reduction to 12.5 per cent could cost Scotland more than £12bn over the next five years – the equivalent of around 8 per cent of the Scottish budget. The Scottish Government themselves admit that there would be a short term funding gap so will they tell us where the money will come from and what public services will be cut. They have no published plan on how to manage this.

“That would create a significant financial black hole in our economy.”

“To justify these plans the SNP point to Northern Ireland, where there is consultation on devolving powers to allow the Assembly to cut Corporation Tax to 12.5 per cent. But the case here in Scotland is very different.

“Northern Ireland Assembly shares a land border with Eire. And a cut would equalise the rates with Corporation Tax in Eire.  That in itself is perhaps a strong argument against devolution as they are using the consultation to argue that they need to equalise for the benefit of their economy.  Highlighting a potential race to the bottom.  Who’s to say the UK Treasury would not seek to protect businesses in England by lowering the overall Corporation Tax rate? “

“It is important for Government to support our businesses. But I have run my own businesses since I left University, and I know that in times of economic downturn Corporation Tax – which is only paid on profitability – is the last thing on your mind. “

“Business owners now are far more concerned with their economic survival, making the next payroll run and getting the support they need from their banks.

“Even independent auditors have found Corporation Tax is not one of the main drivers in strengthening economies.  And the recent economic downturn shows just how quickly Corporation Tax receipts can fall. It is a hugely volatile tax as we have seen in the current economic downturn and, therefore, would put additional pressures on public services in times when they are needed most.”

“The countries with lower Corporation Tax rates are Ireland, Spain, Portugal, Iceland and Italy.  Germany is broadly similar and Norway higher.”

“The Scottish Government are overstating the importance of corporation tax in the decision making process of major companies. The John McClaren report for the CPPR stated that companies rated it at the 17thmost significant factor in deciding where to locate their corporate HQ. Citing things the SNP currently have control over such as transport infrastructure and skills higher. The Scottish Government could have committed to GARL and EARL and it is these types of major capital projects that drive business decisions.”

“The SNP must know that these additional powers are undeliverable and potentially damaging for Scotland and the UK. They are using this as a platform to pick a fake fight with Westminster – and when so many people are worried about their finances and cuts to services that is reckless.

“We must ask ourselves what kind of Scotland we want in the future, how we make the most of the potential of Scotland and how we deal with the challenges of today and beyond.

“I’m unconvinced that a multi-billion pound transfer of financial resources from the public purse to private business at the expense of our proud public services is a Scotland that most Scots want to see.  The question must be what kind of Scotland do we want in the future?”

READ IAN’S FULL REPORT HERE: Ian_corporationtax