Lost billions cast doubt on corporation tax plans

Following the SNP's historic victory in the Holyrood election this month, First Minister Alex Salmond has issued a list of demands for additional powers including control of corporation tax.

The UK government has said it may consider the idea but only after a consultation into whether the Northern Irish Assembly can have the tax power to tackle more competitive low rates in Eire.

Previously the Calman Commission, which looked at the issue of more powers for Scotland, rejected devolving corporation tax because it was too unstable.

And yesterday, a written answer to Glasgow North East Labour MP Willie Bain revealed for the first time the scale of avoidance of the tax by large businesses - totalling 2.8bn - leading to further questions over whether a much smaller Scottish budget could absorb even a 10 per cent share of that hit.

Mr Bain said: "This seriously undermines the argument for setting up a separate system of corporation tax in Scotland.

"There is clearly great unpredictably and the reports underpinning the Calman Commission illustrate why it is better to devolve elements of income tax, rather than corporation tax.

"There are already serious problems with collection, and having two systems of corporation tax operating in close proximity on this island would make it even harder to detect and prevent this kind of avoidance.

"The SNP have failed to provide any detail about their desire to set up a separate corporation tax regime in Scotland and sadly this is all too typical of their approach."

But the argument was rejected by the SNP Scottish Government which still plans to press for the extra power, arguing that it would be an important lever in growing Scotland's economy.

A spokesman for Mr Salmond said: "This figure indicates that these matters can be dealt with far more effectively and efficiently by devolving the tax than the UK seems to be capable of."