Page last updated at 20:22 GMT, Wednesday, 19 November 2008

Business leaders urge tax rethink

Council tax bill
Ministers have said scrapping the council tax would benefit most people

The impact of the proposed local income tax would be "spine-chilling" in the current economic climate, business leaders have warned.

Scottish Government ministers hopes to replace the council tax, claiming that a charge based on ability to pay is fairer than the current system.

But Norman Quirk, from the Scottish Chambers of Commerce, said it would be "the wrong tax at the wrong time".

The Scottish Government said it would be the biggest tax cut in a generation.

But the proposals have been the subject of criticism from business leaders.

Speaking at the SCC's 60th anniversary dinner in Glasgow, its chairman, Mr Quirk, urged ministers to ditch the plans.

We have made clear that we will help business and others by introducing it at a standard 3p rate across Scotland
Scottish Government spokesman
He said: "No-one would argue with the fact that the council tax has proved to be unpopular with many people - taxes are rarely vote winners for politicians - but a local income tax is not the answer."

Under Scottish Government proposals, a local income tax would be set at 3p in the pound, although there have been suggestions that councils could be allowed to vary the charge down from this.

However, Mr Quirk argued that increasing income tax north of the border would make Scotland a less attractive place to do business.

"A local income tax is a tax on labour at a time when government should be pulling all the levers to ensure that the economy is running at full throttle," he said.

"Scotland needs to be geared up to compete in a cut-throat global marketplace, but by raising the rate of income tax in Scotland 3% above that in the rest of the UK, the Scottish Government would be leaving our domestic businesses hamstrung and making Scotland a less attractive place for inward investors."

He claimed it could cost Scottish businesses 60m to administer in the first year alone, and up to a further 18m a year after that.

'Think again'

"Even in an economic boom time, the risk to Scottish competitiveness would be worrying - in the current climate it is positively spine-chilling," Mr Quirk said.

"Our clear message to the Scottish Government and the supporters of a local income tax is to listen to the overwhelming view of the Scottish business community and think again."

A Scottish Government spokesman claimed the proposed tax would put money into the majority of people's pockets and lift 90,000 Scots out of poverty.

"A competitive, successful Scotland with the lowest local tax in the UK will continue to attract people to live and work in Scotland," he said.

"Scrapping the council tax will benefit the vast majority of people, including the self-employed.

"We have made clear that we will help business and others by introducing it at a standard 3p rate across Scotland, and use the existing HM Revenue and Customs systems for collection."

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