The Scottish Government’s proposed Local Income Tax (LIT) would be bad for enterprise and for the economy, CBI Scotland has warned.

In a submission to the Scottish Government’s consultation on LIT the business organisation represents its members’ concerns over the proposals. Key amongst these concerns are the extra costs and administrative burden on employers, the potential for a negative impact on labour mobility and the ability of Scottish employers to attract talent from out with the country. A higher tax on income would also send out the wrong signal to prospective investors according to the CBI.

The business body also raises the issue of a likely shortfall in public funding as a result of the tax with less finance available for investment in skills, industry and transport as a result. It claims a lack of hard data or estimates within the proposals to support the case for a changeover to LIT.

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The consultation on the means based tax which would replace Council Tax closes in July with the responses due to be published by October.

CBI Scotland’s Chairman, David Thorburn said: "CBI Scotland has warmly welcomed the Scottish Government’s ambition to grow the economy and we will continue to support policies that help achieve that goal. However, our members are deeply concerned that a local income tax would undermine the competitiveness of Scots-based firms, increase their costs particularly compared to competitors based elsewhere, and burden them with yet more red tape. Furthermore, it would do nothing to attract the talent and corporate headquarters that Scotland needs, or indeed help retain those it already has."

CBI Scotland’s Director, Iain McMillan, added: "Our members have supported the freezing of the Council Tax. However, the devolved government has failed to make a convincing case for changing the local tax system, or for placing on the shoulders of employers the responsibility for calculating and assessing each individual employee’s tax liability, deducting this amount and then remitting it to the relevant tax collection agency. The scarcity of data or estimates to back up the proposed tax change and what it might mean for businesses is a serious omission, and puts at risk the credibility of the administration’s proposals."

(GK/NS)