Scottish Office Minister Henry McLeish

Drop Tax Powers in Devolution Bill, Says Scottish CBI

Scottish business leaders want the Government to drop tax-raising powers from its devolution legislation to avoid the practical problems and costs associated with revenue collection.

Under Labour's plans, a Scottish Parliament will be able to adjust the basic rate of income tax up or down by 3p if the electorate votes Yes in the two-question referendum planned for the autumn.

But in a submission to the Scottish Office minister for home affairs and devolution, Henry McLeish, the Confederation of British Industry in Scotland expresses serious reservations about the proposals.

Iain McMillan, director of CBI Scotland, said: "Whilst CBI Scotland remains doubtful as to the business and economic advantage in the establishment of a devolved Scottish Parliament, it is important that we attempt to influence the forthcoming White Paper."

"The best outcome would be for the tax powers to be dropped. But, at the very least, we would hope that the taxation of small unincorporated businesses and business rates would be excluded from the powers of the proposed Parliament", he said.

In its submission, CBI Scotland highlights the practical difficulties and added costs of collecting the "Tartan Tax", particularly through payroll adjustments and changes to residence criteria.

"It is our view ... that the logistical details of the proposed variation in basic rate tax for tax payers ordinarily resident in Scotland are formidable and consequently expensive."

The submission calls on Mr McLeish to give an assessment of the net gain from a varied basic rate of tax in the White Paper.