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Details of the 'significant' economic benefits that would be felt in Scotland as a result of a more competitive corporation tax have been set out today for the first time.

The figures form an integral part of the case being presented to the UK Government which argues for the Scottish Parliament and Government to gain this key power to boost Scotland's economy.

Finance Secretary John Swinney and Cabinet Secretary for Parliamentary Business Bruce Crawford will present the paper to the Scottish Secretary Michael Moore this afternoon.

Part of the case being proposed to the UK Government for devolving corporation tax includes the initial modelling work undertaken by the Scottish Government which highlights that pre-announcing a reduction in corporation tax equivalent to a fall from 23 per cent to 20 per cent would lead to:

• An increase in the level of Scottish GDP by 1.4 per cent after 20 years;
• An increase of 1.1 per cent (equivalent to 27,000 jobs) in overall employment in Scotland after 20 years;
• An increase in overall investment in the Scottish economy by 1.9 per cent after 20 years; and
• A boost to Scottish exports to the rest of the UK by 1.4 per cent and to the rest of the world by 1.3 per cent after 20 years.

Finance Secretary John Swinney said:

"For the first time we now have clear evidence of the potential economic benefits to the Scottish economy from Scotland securing responsibility for corporation tax. This new evidence provides a vital and significant contribution to the debate and forms part of our submission to the UK Government for economic teeth to be added to the Scotland Bill.

"Since 2007 we have taken forward a range of initiatives to make Scotland the most competitive location in the UK to do business. However, under the current constitutional arrangements, control of many of the key job creating powers including 90 per cent of Scottish tax revenues are reserved.

"Corporation tax is one of the chief levers that government can use to promote growth, investment and jobs. Used wisely it can be a vital source of competitive advantage and there is clear evidence from around the world of the benefits to employment and the economy.

"The figures, in the document published today, add further weight to our overwhelming argument that with control of corporation tax, Scotland can raise its economic performance.

"We have the support of successful business leaders, job and wealth creators in Scotland such as Jim McColl and Sir Tom Hunter. The cross-party Scotland Bill Committee in the last Parliament also concluded that this power should be available to the Scottish Government if it is granted to Northern Ireland.

"There are numerous examples where corporation tax has been successfully devolved in other countries and they all continue to perform effectively and competitively. There are also examples where systems have been developed to minimise costs of administration. I see no reason why Scotland cannot follow the lead of other countries by introducing an efficient and effective system for collecting corporation tax receipts.

"The Scotland Bill provides an ideal opportunity to devolve this power and the UK Government must now act. The people of Scotland have spoken decisively and Westminster must respect the fact there is now clear majority opinion in Scotland for more substantial financial powers for our national Parliament, including transfer of responsibility for corporation tax."

Details of the modelling work exploring how changes to the corporation tax rate could impact the Scottish economy are included in the full paper.

The UK Treasury has made the case for devolving Corporation Tax to Northern Ireland:

"A lower corporation tax rate would, on its own, be likely to have a positive effect on local private sector investment and foreign direct investment (FDI) by increasing the return on capital to investors. In addition, a lower corporation tax rate means that businesses may have more post-tax profits available for internal investment. Increased investment, other things being equal, typically leads to increased growth and employment." Source: Rebalancing the Northern Ireland Economy, HM Treasury, March 2011

The previous Parliament's cross-party Scotland Bill Committee concluded that:

"the Committee's view is that if a scheme to vary corporation tax were to be available in some of the devolved countries of the UK as a tool of the UK Government's regional economic policy, it should be available as an option for a Scottish Government to use also. Any discussions about this should involve all the devolved nations." Source: Scotland Bill Committee Report.

Key business people have backed calls for the devolution of Corporation Tax:

"Scotland needs all the powers at its disposal to give people the reason to bring their business and investment to Scotland. Corporation tax would provide a significant fiscal lever to provide necessary incentives providing a major boost for the Scottish economy at a critical time." Jim McColl, Clyde Blowers, 14 August 2011

The UK Government plans to reduce the headline rate of corporation tax in the UK to 23 per cent in 2014-15. Therefore the Scottish Government has undertaken modelling work which is equivalent to the headline rate of corporation tax in Scotland falling from 23 per cent to 20 per cent.

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