Company directors want tax powers devolved to UK cities

Scotland would not be alone in having its own tax rate from April 2016 - and holding onto the resulting revenues - if UK company directors had their way.

According to a survey by the Institute of Directors (IoD), more than two-thirds of managing directors favour tax powers being devolved to cities or regions south of the border.

The finding indicates that the idea of devolving tax powers on a permanent basis, as Holyrood was pledged before the vote, is no longer appealing to only Scots.

Although the specific tax powers incoming to Scotland  are yet to be identified, Westminster’s guarantee that workers in Edinburgh will have their own rate of income tax appears to have convinced IoD members that cities in England deserve to have the same for their workers.

Almost 900 IoD members were polled online following the vote, and 67 per cent said they would like to see devolution of tax (and spending) powers at the regional and city level.

For now though, even the practicalities of how just two tax systems will operate is concerning accountants, let alone the prospect of how numerous tax systems would work.

“Politicians must confront the crucial question of how much tax competition they are willing to entertain within the United Kingdom,” reflected the Chartered Institute of Taxation (CIOT).

“Two tax systems will impact on where taxpayers decide where to live, where businesses decide to base their operations, where business is done in the UK, and where businesses decide to invest.”

Speaking at the weekend on behalf of Scotland’s entrepreneurs, the boss of Aberdeen Asset Management said the most attractive campaign promise by the SNP was to set corporation tax three percentage points below that for the rest of the UK.

“There is so much more we can do, though,” Martin Gilbert, the company’s CEO wrote in yesterday’s Sunday Times. “A Scotland with greater fiscal freedom could offer a range of grants and tax advantages to encourage start-ups and emerging businesses, including reduced employers’ NICs.”

At present however, it is just income tax, landfill tax and the equivalent of stamp duty that Scots tend to expect are going to transfer to Holyrood, assuming the current devolution rules are not changed.

This limited list may reassure some, as business group the CBI has warned that too much variety in tax rates and rules could “undermine the strength of the single internal market.” Any complexity might also deter investors from outside the UK.

The CIOT’s Moira Kelly reflected: “In anticipation of a ‘devolution convention’ for the Scottish Parliament, politicians of all colours and stripes must be clear about what tax decisions they are willing to devolve”.

She added: “The political convention provides an opportunity for Scotland and the UK to address what can be done with taxation in terms of devolution, and how differential tax rates, thresholds and allowances will affect the operational make-up of the UK economy.”

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