MPs give Alex Salmond new weapon in battle for power over business tax

PRESSURE has been piled on the Treasury to consider devolving corporation tax to Scotland after a report by MPs.

The Northern Irish select committee has unanimously recommended that the province's assembly should be allowed to vary corporation tax rates.

That power is one of the key demands for Holyrood put forward by First Minister Alex Salmond, who held a meeting with Chancellor George Osborne earlier this week.

But Mr Osborne is understood to be opposed to devolving control over the tax to the Scottish Parliament.

The Northern Ireland committee report carries weight because it is made up of a majority of MPs from other parts of the UK and is chaired by a Tory, Laurence Robertson.

However, it notes that the case for the Northern Ireland Assembly having corporation tax powers does not support the case for the Scottish Parliament.

Instead, it concentrates on the problems caused for Northern Ireland having to compete with much lower corporation tax rates in the Republic of Ireland.

The report states: "We recognise there is value in UK fiscal unity and value in a tax system that is administratively simple to operate, both for HMRC and businesses. We are also aware that the Calman Commission in Scotland and the Holtham Commission in Wales are part of a broader debate around the devolution of tax powers to their respective parts of the UK.

"However, the situation in Northern Ireland is different from Scotland and Wales.

"Northern Ireland is the only part of the UK that shares a land border with another sovereign country, and that country has a corporation tax rate of 12.5 per cent (compared with 26 per cent in the UK]."

But Mr Salmond argued it showed the principle of devolving the tax had been established.

He said: "There has already been support from the Secretary of State for Northern Ireland, and the all-party Scotland Bill committee of the last Scottish Parliament noted that if Northern Ireland gets to decide on corporation tax, then so must Scotland.

"This is a further indication of the way the wind is blowing, and a similar move for Scotland is inevitable. Rather than being dragged there over time, it would be far better for the UK government to engage and respond positively now."

A Scotland Office spokesman said: "The Scotland Office is currently awaiting detailed proposals on corporation tax from the Scottish Government, which the First Minister agreed to provide following his meeting with the Secretary of State for Scotland.

"There has not been any decision on corporation tax for Northern Ireland by the Treasury. The report itself points out the situation there is different from that in Scotland."