CBI Scotland warn of ‘long-term damage’ to economy over income tax

Scottish income tax rates must remain competitive with the rest of the UK or risk “long-term damage” to the economy, CBI Scotland has warned ahead of the Budget.

Finance Secretary Derek Mackay has been urged to enhance Scotland’s competitiveness and not be tempted by a “one-off tax raid”.

With Mr Mackay set to unveil the Budget next Wednesday, CBI Scotland Director Tracy Black warned that businesses were concerned about their ability to compete with rivals across the UK if Scottish income tax rates are higher.

Recommending the Scottish Government commit to no further changes on income tax levels in comparison to the rest of the UK, Ms Black said: “Income tax could become a major issue for companies keen to attract the best talent.

“For the past couple of years, the CBI Scotland message for the Scottish economy has been a clear one: address weak levels of productivity and safeguard Scotland’s competitiveness.

“Alongside avoiding a catastrophic no-deal Brexit and the untold damage that would do to the economy, this remains the key priority for Scottish firms as we approach the Scottish Budget.

“We all want to see a Scottish economy firing on all cylinders, yet there’s no escaping the fact that hard choices lie ahead. Supporting the private sector to deliver growth, jobs and prosperity remains the best option to boost the country’s coffers and ensure public spending is sustainable.

“One-off tax raids may look appealing but there’s only so many times you can raid the cookie jar.”

On possible income tax changes, the CBI Scotland submission said: “Scottish businesses are adamant further divergence between Scotland and the rest of the UK on income tax could significant dent Scotland’s ability to compete for talent and investment, causing-long term damage to prospects for the economy.

It also set out a range of recommendations for the Budget, including doubling the Flexible Workforce Development Fund, committing to a joint target for public and private research and development spend to reach 3% of GDP and — in the longer term — helping business support more women back to work through more flexible childcare support following childbirth.