Corporation Tax

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Reduced rate after Independence

The current Scottish Government would reduce the rate by up to three percentage points to signal that Scotland is one of the most competitive and attractive economies in Europe, with tax rates designed to boost economic activity, offsetting competitive advantages enjoyed by other parts of the UK, notably London [1].

Effect of reduction

Modelling suggests that such a cut could increase the level of output by 1.4 per cent, boost overall employment in Scotland by 1.1 per cent (equivalent to 27,000 jobs) and raise overall investment in the Scottish economy by 1.9 per cent after 20 years [2]

References

  1. Scotland's Future (Scottish Government, November 2013) Chapter 3
  2. Scottish Government: Devolving Corporation Tax in the Scotland Bill (2011).

Reduced rate after independence

Weir Group, one of the largest companies based in Scotland, would suffer more corporation tax, despite the Scottish Government's proposal to cut the rate, due to it no longer being able to offset losses in Scotland against profits in the rest of the UK [1].

Effect of reduction

The Scottish government’s estimate that lower CT will generate 27,000 jobs is, in the opinion of the think tank Oxford Economics, over-optimistic in a context where other countries, including the UK, are also reducing their CT rates. Moreover, fiscal realities will likely constrain the policy choices of an independent Scotland[2].

References

  1. Weir Group:Independence Report by Oxford Economics, which is a commercial venture with Oxford University’s business college to provide economic forecasting and modelling to UK companies and financial institutions and which claims to be ne of the world’s foremost independent global advisory firms.
  2. Weir Group: Independence Report supra page 1: Executive Summary