Showdown in debate on devolved tax

Ben Thomson

The two have been engaged in a war of words for weeks against the backcloth of the hotly debated Scotland Bill which proposes more tax raising powers for the Scottish government.

Thomson, who is leading the debate about greater fiscal powers for Scotland through the Campaign for Fiscal Responsibility, has accused the CBI Scotland of being inconsistent over corporation tax.

He said it was failing to follow the example of the CBI in Northern Ireland, which wants a lower corporation tax to that levied in the rest of the UK.

"Why is CBI Scotland saying we shouldn't have a lower rate for Scotland? That seems a very mixed message," said Thomson.

He wants to see more powers for Scotland that would enable it to introduce a zero rate of corporation tax, effectively scrapping the levy to improve the country's competitiveness.

In a submission to the Northern Ireland Affairs Committee last year, CBI Northern Ireland said lowering its corporation tax to 12.5 per cent, aligning it with Dublin, would lead to a "transformational step change" in the region's economy and that any loss of investment to the rest of the UK would be "of much lesser significance".

McMillan responded by saying Northern Ireland faced different problems to those in Scotland. "We think the single market of the UK is best served by having a level playing field on corporation tax and most of the other legislative areas that impact on business," he said.

"The last thing our members want to do here is to start introducing differences that will raise barriers to businesses operating both sides of the Anglo Scottish border."

McMillan admitted a very low tax rate as proposed by Thomson could prove attractive to companies. But he argued that the Scottish Government's plans to raise taxes on firms in Scotland through the proposed large retailer levy put the government's "judgment into doubt".

He said: "Ben would like a zero rate (of corporation tax], but is that likely? The very political party that has called for these fiscal powers so they could mimic Ireland has just put the business rate up.

"Why hasn't Ben called for the end of the business rate? That is something the Scottish Government could do."

Thomson argued that as firms globalise, the corporation tax will be "harder to collect". "You might as well face up to the fact and get ahead of the curve and have a lower corporation tax than everyone else - even having no corporation tax."

He added: "Why are people so afraid of public sector competition? In all other walks of life you are glad there is more than one supermarket chain, you have a choice and they compete with each other to drive prices down. Why shouldn't we have different regions of the UK having different tax systems?"

In an exchange of correspondence at Christmas, Thomson accused McMillan of running a "one-man political crusade" against debate on the topic, while McMillan accused Thomson of being "obsessed" with fiscal autonomy.

Thomson claims the bad blood between the two is such that the CBI has since cancelled an event to be held jointly with Reform Scotland.

McMillan insisted he admires Thomson but disagrees fundamentally with his views. "I know Ben and I like him, and I have no issue around Ben personally.

"He is a very successful businessman and a bright guy, but that doesn't make him right that Scotland's economy would improve as a result of the country being given greater fiscal powers.

"I'm not interested in taking forward any debates about fiscal autonomy with Ben Thomson or anyone else because it isn't going to happen.

He added: "The only realistic prospect for this year and for some time to come is Calman (the commission that led to the Scotland Bill]. And frankly I have more important things to do."