Reform Scotland's Proposal: Corporation Tax Autonomy For Scotland.pdf

Scotland needs to attract more taxpayers, especially high earners, by fostering a competitive economic climate conducive to entrepreneurship and new business creation. Despite being one of the top-performing regions in the UK, Scotland lags behind in the number of businesses per capita, except for the North East.

Demographic challenges include an aging population, fewer working-age individuals, and rising dependency rates, impacting future prospects. Reform Scotland advocates for more fiscal powers to be devolved to the Scottish Parliament, suggesting that devolving corporation tax could help attract higher earners and address these issues.

In 2017/18, only 0.6% of taxpayers in Scotland were additional rate payers compared to 1.1% in the rest of the UK. Scotland relies heavily on basic rate payers for non-savings, non-dividend income tax revenue, unlike other regions that benefit more from top-rate payers.

Scotland's business turnover is lower than similar-sized regions like the West Midlands and East Midlands, despite having a comparable population to the former. The Scottish Parliament controls 63% of expenditure but only 28% of revenue, with non-savings, non-dividend income tax accounting for 65% of devolved revenue.

Policy recommendations include devolving on-shore corporation tax to Scotland, similar to Northern Ireland's model established in the 2015 Act. This would reduce reliance on a single tax and increase control over revenue. A proposed policy could offer a zero rate of corporation tax for new businesses setting up in Scotland once they begin earning profits, encouraging entrepreneurship without immediate cost but contributing through employment.

This approach aims to signal that Scotland is open for business, attracting more entrepreneurs and higher earners.