15 May 2011

Just a thought

You know how the SNP is dead keen on the devolution of corporation tax. They could then use reduced rates of tax to attract companies to invest in Scotland. Splendid idea if it works.

But. But. Let us suppose that the corporation tax rate was duly devolved and appropriately reduced. How would we decide to which companies the reduced rate would apply? Simple you say: those companies registered with companies house in Scotland would qualify. Well ok but a lot of companies operating in Scotland do not happen to have their registered office in Scotland and are not therefore registered in Scotland. And some of the companies registered in Scotland do lots of business in the rest of the UK and even abroad.

Should these companies benefit from the Scottish concession? Maybe, provided they can identify how much of their pre-tax profit is attributable to business conducted in Scotland. Oh, and provided HM Customs and Revenue are prepared to trust them on the allocation.

If you are the boss of Tesco or the RBS, can you readily identify the amount of profit coming from Scotland? Not without considerable effort, I suggest.

I’m not suggesting that the devolution of corporate taxation should not happen. But it would be nice to know how the details will be resolved.

1 comment:

The Aberdonian said...

I am sure that looking at the systems of Canada and the USA where corporation tax differs from state to state or province to province will give some guidance.

Always been a bit puzzled how companies who operate perfectly well there - and who also have to deal with state/provincial sales taxes and a whole host others - seem unable to be able to cope on this side of the Atlantic.

Remember that Canada might be a big country in terms of geography but the country's population is about half of the UK's.