Hunter calls for 15% corporation tax for Scotland
Sir Tom Hunter is calling for Scotland to be turned into a 15% corporation tax zone for three key sectors in order to stimulate its lacklustre economy.
He wants a targeted tax cut in renewables, life sciences and big data – three sectors which he believes could be global winners for Scotland.
UK businesses with profits above £250,000 currently pay 25% corporation tax rate, while firms with profits of up to £50,000 pay 19%.
The serial entrepreneur and philanthropist said Holyrood and Westminster must work together to emulate the success of Ireland where a 12.5% tax rate – recently raised to 15% – has seen its economy grow faster than Scotland and attract international investment.
The Ayrshire-based businessman said Ireland had benefited from being inside the EU and said Scotland needed “positive migration” and a wealth fund. Corporation taxes are reserved to Westminster but he denied that his proposals, which are detailed in a research paper by Oxford Economics, were close to SNP policy and tantamount to setting out the case for independence.
“I am not politically aligned, I just want to start a debate,” he told Daily Business, adding that it was time for “big ideas” and a “grown up debate”.
He said that in 2021 Ireland’s low corporation tax attracted 249 investments compared to Scotland’s 122 and there were 39.9 STEM graduates per 1,000 of the population, compared to Scotland’s 20.9.
From 2012 to 2022 Ireland’s GDP grew on average by 8.9% per annum compared to Scotland’s “rather anaemic” 0.9%.
Ireland is home to nine of the top ten pharmaceutical companies and 14 of the 15 top medtech companies. The Irish Government has forecast a €65 billion surplus over the next three years.
Sir Tom said: “The Irish experience tells us we will net more tax, more jobs and more value from this highly-focused approach with one agency delivering that approach than we will with our current strategy. And that one agency should deliver domestically and for inward investment.”
He said he had been “no fan” of Brexit but said that rather than complain, “we can do something about it” and he challenged the two governments to come together to develop radical ideas.
However, he faces huge objections from UK government ministers and backbenchers, as well as companies south of the border who would be certain to oppose any plan to create a lower corporation tax base in Scotland that would put England at a disadvantage.
There are also international considerations. In October 2021 the Irish government reluctantly signed up to an OECD-brokered global treaty designed to create a level playing field and prevent multinational corporations choosing to pay tax in the lowest jurisdictions.
It meant Dublin had to raise its 12.5% rate to 15%. Its implementation has been delayed until next year because of difficulties discussions over technical aspects of the agreement.
There are also objectors to lower corporation taxes in the US where a strong lobby supports higher taxes, particularly as some of its corporations make billions of dollars in profits.
There is concern that lower taxes encourage a “race to the bottom” among countries to attract foreign investment. This is likely to cause a loss of tax revenue and put public services at risk.
“It is a big ask,” conceded Sir Tom, “but we’re hoping politicians can see something in this.”
“The answer is not progressive taxation as we learn from the Irish experience – it’s a focused, low (and at one point no) tax system that targets sticky jobs in growth sectors in a highly focused manner. By sticky I mean high value, permanent jobs that do not – as in Silicon Glen – drop off as lower cost nations compete.
“So 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.
“The Irish experience tells us we will net more tax, more jobs and more value from this highly focussed approach with one agency delivering that approach than we will with our current strategy. And that one agency should deliver domestically and for inward investment.
“And as the Ireland Strategic Investment Fund starts to deploy (its) sovereign wealth fund to support economic growth we need to compete and, in time, grow our own fund.”
He said the current Innovation Fund of circa £100m over ten years launched a couple of months back “is frankly not enough”. R & D funding in Scotland is circa £4.5 billion per annum and £100m “will transform very little indeed.
“The announcements on two new Investment Zones for Scotland is welcome but let’s face it we are talking £16m per annum for five years; not to be sniffed at but hardly jaw dropping either. Moreover all of Scotland should be a competitive location not just the Glasgow City Region and the North East of Scotland.
“We need big ideas that can be delivered and we need a one door approach to attracting FDI that rivals IDA Ireland (their investment arm for inward and domestic growth.
“We need to understand, over and above what’s noted here, why their (Ireland’s) 162 employees in 23 offices globally delivers so well against Scotland Development International and its 348 employees across 30 offices. Is Ireland’s trick pathological focus on key sectors?
“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.”
Sir Tom said his Hunter Foundation does” not claim to have all the answers but we do believe through constructive debate we will get better answers and outcomes for Scotland.”