The Scottish Conservative leader faced questions about the impact of Theresa May’s target of reducing net migration to the tens of thousands amid a skills shortage north of the border.
Ms Davidson visited the Shortbread House of Edinburgh’s factory to highlight the importance of the UK market to Scottish businesses and jobs.
Asked whether the cap is workable for Scottish businesses, she told BBC Scotland: “I think the real question in Scotland is when we’ve got a third of the landmass and 8.4% of the UK’s population, why do only 4% of people who choose to move and settle in the UK want to come to Scotland?
“I think that’s because we’ve got the highest taxation, we’re losing our reputation for being the best school area in the country, and I think there are real questions there for the Scottish Government.
“The change that’s going to happen with Brexit is that the UK will make decisions about immigration rather than having those decisions made by 27 other countries. But what’s important is that we do attract people into Scotland.
“If you look at, for example, the Scottish occupational shortage list, it’s not different to that in the rest of the UK, so why is it that people are choosing to settle elsewhere but not here?
“I think we need to make sure that we’ve got a more competitive tax regime, that we’re not a quarter away from recession as we are - we’ve got an economy growing slower that the rest of the UK - and we need to restore some of the chances that people look for in Scotland like good schools.”
Ms Davidson also highlighted research by the Fraser of Allander Institute which last month found more than half a million Scottish jobs depend on trade with the rest of the UK.
She said: “Scottish firms, large and small, are clear - breaking up the UK internal market would cause huge damage to their ability to provide job opportunities.
“Yet such is the SNP’s obsession with independence, they are willing to put those jobs at risk.
“We solve none of the challenges thrown up by Brexit by fracturing our own union of nations.
“The UK is Scotland’s essential union - and the SNP must now drop its threat of a second referendum so we can all move forward, together.”
Responding to Ms Davidson’s comments on migration, SNP candidate for Edinburgh South West Joanna Cherry said: “It is utter hypocrisy for the Tories to claim Scotland is an unattractive place to live and work, when it is the Tory Government who are deporting successful business people, like the Zielsdorf family from the Highlands, out of Scotland, and doing their level best to prevent people coming to live here.
“Scotland is a wonderful place to live and work, and people from all around the world choose to make Scotland their home - only the Tories could stoop to branding our country ‘unattractive’.
“Taxpayers in Scotland pay less council tax than in England and benefit from Scottish Government policies like free university education, free prescriptions and personal care - all of which are effectively taxed in England - so for the Tories to claim that migrants are put off Scotland due to taxation is complete nonsense.”