Tax on companies in three key sectors should be slashed, businessman Sir Tom Hunter suggested, as he called for a “grown-up debate” on how Scotland could become an “economic powerhouse”.
The businessman suggested that corporation tax, paid by companies on their profits, be cut for those firms operating in “three key global growth sectors”: renewables and the low carbon manufacturing sector; life sciences and medical technology; and software, big data and artificial intelligence (AI).
The UK Government has currently set the tax at 25% for companies with a profit of £250,000 a year or more, with a rate of 19% being applied for those firms with a profit of £50,000 a year or less.
However, Sir Tom, who made his money through retailer Sports Division and, later, West Coast Capital, said Scotland could “learn from the Irish experience”, where the tax system targets “sticky jobs”: high value, permanent positions.
In a paper produced by Oxford Economics for Sir Tom’s philanthropic Hunter Foundation, the businessman said: “Here’s my suggestion to Holyrood and Westminster – make all of Scotland a 15% corporate tax zone for three key global growth sectors: renewables and low carbon manufacture and services; life sciences and medical technologies and software, big data and AI.”
He made the plea as he insisted: “It’s time for a grown-up debate and action over how we make Scotland an economic powerhouse.
“We need to stop doing those things that don’t add any value and focus on what delivers, otherwise, with a ticking demographic time bomb, we will leave an unbelievably appalling legacy for the next generation of Scots to contend with.”
The report noted that while it had taken Ireland six years to return to its 2008 level after the crash, it had gone on to record a “remarkable 8.9% average annual growth rate in GDP between 2012 and 2021”.
Meanwhile, in Scotland, “recovery remained weak” with GDP growth of 0.9% a year over the period.
The report said that a “key factor of Ireland’s economic transformation was FDI (foreign direct investment) with a regime of low corporation tax playing a large role to attract investment”.
Ireland has benefited from a “deliberate focus on a small number of high value economic sectors, which have received encouragement from government”, the report added.
It continued: “The result is that Ireland has strong manufacturing and information, communication, and technology (ICT) sectors and is home to some of the world’s largest multinational companies in these sectors.”
The report suggested: “If Scotland can achieve rapid growth in a small number of sectors, it may replicate some of Ireland’s transformative growth.”
And noting that the present corporation tax rate across the UK is 25%, the report states there is “clearly scope” for that to be “cut significantly”.
The UK Government does not currently have any plans to devolve corporation tax to Holyrood, or to set up a specific Scotland only rate for the levy,
A UK Government spokesperson said: “We’re making the UK the best place in the world to do business by offering the lowest corporation tax in the G7, a smart regulatory system and a simplified tax system to save firms time and money.
“Growing the economy is one of our top priorities, which is why we’ve introduced full expensing, an effective £27bn corporation tax cut which results in a 25p tax saving for every pound invested, as well as a new £500m per year R&D (research and development) scheme system for 20,000 UK SMEs (small to medium-sized enterprises).”
Wellbeing Economy Secretary Neil Gray said: “I was pleased to meet with Sir Tom Hunter, alongside the First Minister and Deputy First Minister, to discuss the Foundation’s analysis.
“Scotland has exceptional capability in emerging industries such as clean energy, life sciences and artificial intelligence, and we will continue to use all the powers we have to continue creating an economy which helps businesses to thrive and drives a lasting improvement in our economic performance.
“We agree that a targeted approach to inward investment is required and there is clear evidence that our ‘Team Scotland’ approach is helping to achieve this outcome.
“Scotland’s share of the UK’s foreign direct investment projects reached a record high last year, according to the latest EY survey – maintaining its position as the top-performing area of the UK outside of London for the eighth year in a row.
“While corporation tax is currently controlled by Westminster, we think there are strong arguments in favour of these targeted proposals for Scotland, to boost economic activity in key growth sectors, including renewables and low carbon manufacturing.
“The Scottish Government has already delivered the fairest and most progressive income-tax system in the UK, while raising extra revenue to invest in public services and Scotland’s economy.
“Our medium-term financial strategy sets out a clear commitment to have an increasing focus on the policies and actions with the greatest potential to grow and strengthen Scotland’s economy.”