Why CBI is demanding Scottish Government end 'uncompetitive' tax regime

Business organisation CBI Scotland has published its annual submission ahead of the Scottish Budget, due to be published on December 4, outlining a series of policy demands the group has put to ministers.

The CBI said that whilst businesses in Scotland face a challenging economic and fiscal situation, there are levers the government can use to give firms the best chance of success.

In particular, Scotland’s devolved tax regime has been highlighted as an area for improvement. In this push for a more competitive business environment, the CBI is calling on the government to use tax strategy to prioritise long-term economic growth over short-term revenue raising.

The organisation has asked for a commitment to avoiding further income tax divergence from the rest of the UK, and the commissioning of an independent review into whether tax divergence has hurt Scotland’s competitiveness.

Other issues included in the CBI submission include business rates relief, speeding up green power infrastructure delivery, and futureproofing Scotland’s workforce.

Mags Simpson, Interim Director, CBI Scotland, said: “If the Scottish Government is serious about growth, it must get to grips with the sluggish investment that has plagued the economy in recent decades and tackle Scotland’s underperforming business investment which, as a share of GDP, lags the rest of the UK’s.

“The Budget, and accompanying tax strategy, must focus on addressing uncompetitive tax policies that are acting as a handbrake on growth. The Scottish Government should commit to meeting these challenges head-on by prioritising long-term economic growth over short-term revenue raising measures.

“Delivering a long-term review of the non-domestic rates system, as the UK Government have pledged for England, and a freeze in the basic, intermediate, and higher property rates, would go a long way towards supporting firms facing rising costs.

“With Scotland’s super natural advantages, there big growth opportunities available in the net zero economy, particularly in areas such as on and offshore wind, and carbon capture and storage. Building confidence behind the Scottish Government’s Green Industrial Strategy by setting out how announcements, such as establishing Scotland’s first planning hub, will be funded and realised, can deliver real momentum for growth.”

A Scottish Government spokesperson said: "The Scottish Budget will prioritise funding to deliver on the First Minister's priorities, which include growing the economy. It will be published alongside a Tax Strategy that has been developed through extensive engagement with Scotland's business community and other stakeholders.

“Scotland’s tax policies are grounded in evidence and carefully balance the need to raise revenue with the impacts on taxpayers and the economy. Our tax base continues to grow strongly, with data from the RTI PAYE system showing Scotland experienced faster earnings and tax per head growth than the rest of the UK in both 2022-23 and 2023-24.”