Scotland’s independent think tank
Scotland’s independent think tank

Growing up: a corporation tax for Scotland


Reform Scotland, today calls for the devolution of corporation tax to Scotland to enable the creation of a more attractive business environment. In a new report – Growing Up: A Corporation Tax For Scotland – the think tank outlines why devolution of the tax is needed, and how it could be designed to boost the Scottish economy and benefit broader society.

Scotland lags the UK as a whole in key economic areas:

  • Scotland’s working age population is projected to stall by 2043; the UK’s is not
  • Only 0.6% of Scottish taxpayers pay the Additional Rate, compared to 1.1% in the UK as a whole
  • Scotland has fewer than 750 businesses per 10,000 adults, while the UK has over 1,000.

Scotland’s tax revenues currently fall disproportionately on poorer people. Nearly 44% of non-savings, non-dividend income tax comes from the lowest earners, whereas in the rest of the UK the figure is just over 35%. Despite the fact Scotland has higher top rates of tax than the rest of the UK, the burden rests more on those at the bottom because the nation has fewer wealthier earners. Whereas almost £1 in every £3 raised in the rest of the UK is from the highest earners, less than £1 in every £6 comes from Scotland’s richest.  

The Scottish Government should be given control of corporation tax to widen the basket of taxes available to it. Then, Reform Scotland recommends:

  • The opportunity should be taken to design a corporation tax policy that attracts more entrepreneurs to Scotland, incentivises the creation and development of new businesses and, ultimately, produces more top-rate tax-payers
  • The Scottish Government could offer a zero rate of corporation tax for new businesses setting up in Scotland, including for a set period after they begin to earn profits
  • Such a policy would have no cost because it would apply only to newly created enterprises. Those businesses will contribute in other ways to public revenue, particularly through employment.

Such a step would send a clear message that Scotland is a welcoming and competitive place to do business, encouraging innovators to set up here and lay roots for the longer term. Policies could also be designed to aid particular sectors, as well as to help grow existing businesses.

The reality is that without a more vibrant business-creation environment, Scotland will continue to have fewer high earners than it needs. This makes us more heavily dependent on lower earners than the rest of the UK.”

“The public purse is facing real and growing pressures, and so to pay for social security and public services for decades to come, we need to re-engineer our tax system. Today, Reform Scotland suggests one method of doing that, in a way that can benefit the whole of society.

“By devolving corporation tax to Holyrood, a policy can be designed specifically for Scotland to encourage the creation of more new businesses, new jobs, and ultimately higher tax revenues.”

“The devolution of corporation tax to Northern Ireland shows that there is no administrative impediment to devolution – all that is required is political will.”

Chris Deerin , Director of Reform Scotland