Tesco tax faces axe after committee rejection

John Swinney has vowed to press the case for a tax on large retailers despite a vote today to reject the levy, urging all parties to work together and back his spending plan for next year.

The finance secretary faces a 30 million black hole in his spending plans after MSPs recommended his 'super tax' on big retailers be scrapped.

Holyrood`s Local Government and Communities Committee today in favour of a motion to scrap the Scottish Government`s proposed Large Retailers Levy.

The decision, which still needs to be endorsed by Parliament, comes as MSPs prepare to vote on the first stage of the SNP administration's spending plans for 2011/12.

Mr Swinney`s budget includes the plan to raise 30 million from the most expensive business properties, 86 per cent of which are occupied by the big four supermarkets.

The main opposition parties have offered qualified support for the plans at the first of three stages, but called for significant changes to the final Bill.

In his final address to the committee before the vote, Mr Swinney warned that any decision that removed 30 million from his spending plans would force him to find the money from other areas.

Colin Borland, the Federation of Small Businesses' (FSB) Scottish public affairs manager, said he was "disappointed" that MSPs on the Local Government Committee voted down the proposal.

He said: "We believe there's enough common ground on the broad principle to come up with a mutually-acceptable alternative proposal. We are sure they will now get round the table and address any difficulties ahead of the budget.

He added: "We all know that supermarkets are here to stay and they'll continue to expand into sectors which haven't seen their business model before. Our small businesses are innovative and resourceful and will use every tool in the box to survive, but we must be careful. We know what has happened in the past when the country has become over-reliant on a small number of very large, very powerful employers."

The Scottish Retail Consortium (SRC), has opposed the levy saying it is damaging to growth and job creation in Scotland, welcomed today's rejection.

Fiona Moriarty, director of SRC, said the committee "should be congratulated" for its scrutiny of the levy.

She said: "Members of the committee have taken a level-headed look at the potential economic impact of this levy and wisely taken the view that it is not in the interests of the Scottish economy or Scottish jobs.

"Retail is the engine room of economic recovery and, given the right support, will help Scotland work through the difficult times ahead to build a secure and successful future.

"The proposed Large Retailer Levy endangers future jobs growth and investment. We very much hope the Scottish Parliament will follow suit and vote to prevent it coming into force."

The levy has been dubbed the "Tesco Tax", for its impact on big supermarkets, and the "Princes Street Penalty" for the knock-on effect it could have on a small minority of High Street businesses.

The levy would affect 0.1% of Scottish businesses, increasing the proportion of their average annual turnover spent on business rates from 2% to 2.3%.