Finance Minister Tom McCabe has confirmed that Scottish Parliament is planning to cut business tax rates to the same level as England’s by 2007. This move is intended to bolster growth in the Scottish economy, which has been lagging in the recent years.
Businesses in Scotland lack the competitive edge relative to their counterparts elsewhere in the country, given the higher tax rates, and hence higher overhead costs. The tax cuts are expected to help businesses gain a cost advantage, leading to higher productivity and output.
The new policy will be effected in a staggered fashion, with the gap in tax rates between Scotland and England being halved by 2006, and eventually closed by 2007. The move is not without costs, though. To support the policy, Government expects to shell out £100 million for 2006, £180 million for 2007, and eventually £200 million annually henceforth to compensate for the revenue loss.