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CBI boss says devolving corporation tax ‘must be resisted’

  • McMillan warns of bureaucratic nightmare if taxable profits are divided
  • Urges UK authorities to explain how the union benefits Scotland

Former CBI Scotland director Iain McMillan has urged the Smith Commission on devolution to reject any proposal to shift control of corporation taxes to Scotland.

McMillan, who retired this week after 19 years at the helm of the business lobby group, said that getting the balance of tax powers right was one of the biggest challenges facing Lord Smith.

In the second part of an exclusive interview with Daily Business, McMillan said there was an opportunity for Holyrood to take greater control over income tax but devolving the taxes paid by business would be expensive, bureaucratic and ultimately non-beneficial.

“I think there is scope to devolve more income tax but it is important that the tax base and the tax structure and all the complex rules around what makes taxable income remain at the UK level,” he said.

“The Lib Dems, Conservatives and Labour have not proposed the devolving of corporation tax but I would expect the SNP to argue that it is devolved. It should be strongly resisted.

“It would be very expensive and bureaucratic for the business community and for Revenue and Customs. We have never had to segregate taxable profit within the UK.

“Revenue and Customs would need to resource itself to police the way companies arrive at taxable profits and they would need to be sure that transactions were not undertaken in a way that would produce the highest taxable profit in the lowest tax jurisdiction. There is a danger it would result in a race to the bottom.”

McMillan, giving his final interview following a difficult year for the CBI, told Daily Business that he had no regrets about his actions earlier this year when it was caught in a storm of protest after registering with the No campaign. He insisted the CBI had not been damaged by the registration issue and argued it had seen its reputation enhanced because it had shown itself to be one of the few organisations to stand up in defence of the union.

“We lost five members from the business community, three of which were led by supporters of independence. I was sorry to lose them but in the grand scheme of things it was not even a pinprick.”

He said none has rejoined the CBI.

CBI members across the UK will have input into the Smith Commission, set up by Prime Minister David Cameron to introduce new legislation on more devolved powers.

“We have to make sure new powers to Scotland benefit Scotland but do not harm the rest of the UK,” said McMillan.

“We need to see the UK government more engaged so that business and the public get to know what it is that the UK government is doing for them.”

The role of Secretary of State needed to be retained, he said, arguing that the role was a key to achieving this greater visibility for the UK in Scotland.

In spite of their political differences, he and First Minister Alex Salmond enjoyed a good relationship.

“On every day policy my relationship with him has been as good as with his predecessors. He has not been at one with us on independence but it has been cordial.”

He said he had discussed policy with Salmond’s successor Nicola Sturgeon. “I get on with her very well,” he said.

McMillan, 63, has led the CBI through many battles and highlighted the achievements over business rates, planning and transport. These had been to the benefit of Scottish business and would continue to be issues that the organisation would consider priorities.

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