The rates burden on Scottish business will be reduced to the same level as England, First Minister Jack McConnell has pledged.
Business rate poundage will be reduced to English levels
He announced the move as he outlined the Scottish Executive's plans up to the next election in 2007.
In the current year, the rate cut would have cost the executive about £200m.
Finance Minister Tom McCabe is due to announce by the end of the year details of when and how the rate poundage cut will be implemented.
No formal link
By bringing Scotland's rate poundage down to that for England, the executive is effectively restoring the Uniform Business Rate (UBR) it withdrew from in 2000.
There is no formal link between the Scottish and English rate so the two could again differ in future.
Mr McConnell said rates were a "small determination" of overall business costs but conceded that "at the margin it can be critical".
"Our policy of limiting rate increases to inflation or below has meant that, compared to England, the financial burden has been reducing, but we want to go further," he told MSPs.
Mr McConnell said the executive would also "consider carefully" a specific reduction in business rates for "R&D (research and development) intensive" companies.
"In doing so, we will make Scotland the most attractive place in the UK to invest in research and development," he added.
Scottish Conservative leader David McLetchie said the difference in the tax compared to south of the border had cost Scots firms more than £700m in the past five years.
Mr McLetchie said: "He [Mr McConnell] said that he was very keen to do the right thing for Scotland.
"It is very interesting that when the first minister does the right thing for
Scotland in this parliament it's usually something that the Conservatives have been advocating for the last six years.
Andy Willox, Scottish policy convener for the Federation of Small Businesses, said firms had become increasingly concerned about a "rates gap" with England.
"At a time of increasing waste charges and fuel prices, any savings will be a help to Scotland's small businesses," he said.
Scottish Chambers of Commerce director Liz Cameron described Mr McConnell's announcement as "absolutely fantastic news" and the "first steps" to boosting Scotland's international competitiveness.
CBI Scotland director Iain McMillan added: "This is a step that we have campaigned hard for over five years and I am delighted that the first minister and his executive colleagues have found the financial headroom within the overall executive budget to improve Scotland's competitive position in this way."