Grasping the thistle. Ernst & Young s Scotland corporate tax survey report

Transcription

1 Grasping the thistle Ernst & Young s Scotland corporate tax survey report

2 Research sample and methodology Survey participants by sector 1% 1% 1% 1% 3% 2% The data for this research report was collected through online and hard copy surveys comprised of 13 questions over a period of four months in % 3% 4% The 196 individuals surveyed (representing more than 170 companies with operations in Scotland) are all in senior management positions or above. A third represent growth companies who have entered the Ernst & Young Entrepreneur of The Year Programme. The respondent companies came from 17 sectors, with the greatest proportion of responses being from oil and gas/oilfield services (22% of the respondents), professional services (18%), financial services (14%), engineering (7%) and consumer goods (6%) respectively. Of those that declared a location for their headquarters, 62% were headquartered in Scotland. The respondents varied widely in size, with 37% turning over less than that 10mn a year, 37% between 10mn and 100mn, and the remaining 26% more than 100mn. 4% 4% 4% 18% 5% 6% 14% 7% Oil and gas/oilfield services Logistics and Shipping Professional Services Media and tech Financial services Life sciences Tourism and Hospitality Social enterprise/nfp Food and Beverage Consumer products Renewable Energy Engineering Property and construction Education Transport Other Recycling and Waste Management 1 Grasping the thistle: Ernst & Young s Scotland corporate tax survey report

3 Foreword Corporate tax: a live issue for every business in Scotland In recent months, we have heard a number of opinions on the impact of possible future constitutional and fiscal changes shared publicly by key business leaders. These are both important and useful. However, as yet there is very little clarity over the terms of reference in the constitutional debate. Indeed, as of September 2012, the question to be put in the referendum has yet to be agreed, let alone the meaning of the question or the answer once decided. So, for the time being, any opinions on possible constitutional changes are inevitably a matter of conjecture. In this uncertain context, to help address this, we have developed a series of publications entitled Grasping the thistle. Our intention is simply to facilitate a discussion about the future of Scotland and to provide a channel for communication between Scottish Government and the Scottish business community on key issues which will need to be considered in due course. For this reason, we have followed up our UK and Scottish Attractiveness Surveys to foreign investors, by conducting a multi-sector, Scotland-wide study of business leaders views on corporate taxation an integral piece of the puzzle as Scotland gains additional tax powers. The countdown to Scottish Government having direct responsibility for raising taxes has now started with the enactment of the Scotland Act on 1 May With powers now granted to raise the new Land and Building Transaction Tax (Scotland s replacement for Stamp Duty Land Tax), Landfill Tax and a portion of Income Tax paid by individuals resident in Scotland, planning has commenced as to how to implement these new tax-raising measures. Taken in isolation these changes represent very significant developments in the system of taxation in Scotland and the UK as a whole. However, it is worth emphasising that, while these may be the first small steps towards greater fiscal autonomy for Scotland, the Scotland Act changes will still mean that Scottish Government will collect less than half of its expenditures through directly raised taxes. Putting the Scotland Act to one side, it is well known that the current Scottish Government has been keen to have at its disposal additional mechanisms to influence economic policy implemented in Scotland. While the proposal that Scottish Government should gain the ability to set the rate of corporation tax levied on companies in Scotland was not supported by the UK government, and was therefore not included in the Scotland Act (see Scottish Government s Corporation Tax Discussion Paper: Option for Reform, issued in August 2011), it is clear that the future shape of the corporate tax system in Scotland will remain a very live issue for businesses across the country given the possibility of further constitutional change over the coming years. It should also be noted that the Scotland Act itself includes the power to devolve additional taxes through secondary legislation. Indeed, irrespective of whether there are further changes to the constitutional settlement between Scotland and the rest of the UK, the structure and rates of corporate tax will be a vital factor affecting many aspects of Scotland s economy. These could impact areas including Scotland s attractiveness as a destination for foreign direct investment, to the country s global competitiveness and ability to continue to generate jobs. It is against this background that we have surveyed 196 of Scotland s business leaders all in senior management positions about their expectations, hopes and concerns in the key area of corporate taxation and investment. The findings have been shared with members of government and the national business community. In publishing this report, we are maintaining our commitment to facilitating and informing the debate on the future of Scottish business. In our view, a constructive, informed and public discussion will be key to Scotland s continued economic well-being and vitality in the years to come whatever the changes through which the country s businesses have to navigate their way. Jim Bishop Senior Partner Ernst & Young Scotland Grasping the thistle: Ernst & Young s Scotland corporate tax survey report 2

4 An expectation of lower corporate tax rates but with wide variations at the sector level If a Scottish Government is able to change rates of corporate tax in the future, one business in six in Scotland expects that it would increase them. As Chart 1 shows, 49% of respondent businesses expect that rates would be reduced, and 18% expect no change. So the balance of expectation is clearly weighted to corporate tax rates in Scotland moving below their current UK-wide level. Chart 1: With the ability to change corporate tax (CT) rates, what do you think Scottish Government would do? 17% 16% Increase CT rate 49% 18% Maintain CT rate Reduce CT rate Uncertain Having said that, an analysis of the responses between some of the biggest sectors in the study reveals significant variations in respondents expectations. As Chart 2 indicates, expectations in financial services are deeply polarised, with 30% expecting an increase in corporate tax rates and 52% a reduction. In contrast, the dominant expectation in oil and gas and professional services is for a reduction, although oil and gas also has a much higher level of respondents who say they are uncertain. This outcome is probably attributable to a couple of factors, scepticism of the ability to deliver by Scottish Government (either due to spending pressure, the fact it is not expected oil and gas tax would ever be devolved) or the recent volatility of oil and gas tax rates. The disparity of responses also appears to reflect concern in some sectors regarding how a reduction in corporate taxation rates would be funded. Given the immediate negative impact of a rate reduction on the government s overall tax revenues, and the time lag between the stimulus from a tax reduction and the resulting boost to activity and investment, many businesses surveyed are sceptical that Scottish Government could avoid resorting to borrowing to make up the shortfall. Chart 2: With the ability to change corporate tax (CT) rates, what do you think Scottish Government would do? (By sector) This finding mirrors Ernst & Young s own view which is that the most likely reason for Scottish Government (initially at least) to exercise the power to change corporate tax rates would be to reduce them. It would take this step with the aim of stimulating the economy, boosting business activity, improving Scotland s attractiveness to foreign investors, and to counter some of the structural challenges that have a bearing on the Scottish economy. Indeed, this rationale was very much to the fore in The Scottish Government s paper setting out why it should gain control of corporate tax, meaning the expectations expressed by the respondents to this study are likely to have been framed with this knowledge in mind % 30% 6% Increase CT rate 9% 7% 26% Maintain CT rate 49% 52%57% Reduce CT rate 30% 11% 11% Uncertain Oil and gas Financial services Professional services 3 Grasping the thistle: Ernst & Young s Scotland corporate tax survey report

5 Companies support lower tax rates Despite such concerns, businesses are generally though not overwhelmingly supportive of lower corporate tax rates, with 54% of all respondents saying they would favour a reduction (see Chart 3). Given that lower taxes are a common mantra of businesses everywhere, this is hardly surprising. Support for corporate tax cuts is higher among entrepreneurial businesses, at 64%, possibly reflecting their greater sensitivity to tax charges as they strive to fund growth. Chart 3: Would you support a reduced rate of corporate tax in Scotland? 19% Yes 26% 54% No Uncertain However, given the complex nature of the UK tax regime, the real prize may be the radical simplification of the tax system as a whole. Grasping the thistle: Ernst & Young s Scotland corporate tax survey report 4

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7 but highlight both pros and cons From the perspective of Scotland s economy, the respondent base as a whole is overwhelmingly of the view that a reduction in corporate tax rates would make Scotland a more attractive proposition for increased investment, with 87% agreeing that this would be the case. In support of this view, many respondents point out that a lower corporate tax rate could attract strong and sustained investment from international businesses looking to locate operations in Scotland, echoing the perceived effect of the Republic of Ireland s lower corporate tax rates in recent decades. Further examination of Scotland s attractiveness to foreign investment can be found in the recently published Ernst & Young Scotland Attractiveness Survey. However, some other respondents voiced significant reservations about the impacts of a corporate tax reduction in Scotland, including concerns over whether this would be affordable in fiscal terms. There are also worries about the response to Scotland having a lower rate than the rest of the UK (see information panel below). These concerns are reflected in the comments contributed by our survey respondents. Their overall attitudes ranging from optimistic to cautious are summarised in the accompanying information panel. A number of interviewees steered a middle path, with comments that balanced the pros and cons. One summed up: A reduced rate may have the ability to attract companies to move their headquarters to Scotland. However, this would cost the Scottish Government in lost revenues. The rate reduction and increase in business activity would have to be balanced to ensure the revenue collected remained unchanged. Would you support reductions in corporate tax rates in Scotland? Respondents are sharply divided Asked whether they would support cuts in corporate tax rates in Scotland, the respondents provided widely differing opinions. Some took an optimistic view, feeling that a reduction in corporate tax in Scotland would boost re-investment in operations in Scotland, encourage companies to target growth, and attract more inward investment from overseas. Ireland was suggested as a model for how lower corporate tax might give Scotland an edge over the rest of the UK in attracting FDI. There were also hopes that lower corporate tax would make Scotland more competitive in global terms. However, even some of the supporters of corporate tax reductions accepted that these might need to be balanced by increases in other possibly indirect taxes. In contrast, other respondents were much more cautious about the potential effects of corporate tax reductions in Scotland, or even strongly opposed to them. Some pointed out that the resulting loss of tax revenue might be unsustainable unless the money was recovered from other sources or offset by spending cuts, while others believed any reduction in corporate tax rates would initially be counterproductive, by further restricting the budgets available to improve Scotland s viability as a location for corporate activity. Some opposed the idea on principle, feeling that it was important to maintain fiscal equality within the UK rather than introducing fiscal distortions. Demand for increased devolution in Scotland will reshape UK Mark Hennessy, The Irish Times, 23 February 2012 The northeast of England worries about the powers that the Scots already have, let alone the possibility that they might get powers over corporation tax rates. Last September, it emerged that online retailer Amazon chose Edinburgh rather than Newcastle for a new operation after Scottish Enterprise offered training grants the northeast could not match. Source: Grasping the thistle: Ernst & Young s Scotland corporate tax survey report 6

8 Tax changes driving new strategies Asked to specify the size of rate reduction that would prompt them to change their business s strategy should Scottish Government gain control of corporate tax rates, respondents provided a wide range of responses. As Chart 4 shows, the majority 84% of those surveyed say that a cut ranging between 0 and 7 percentage points would trigger a strategic rethink. Of these, 59% highlight a 4 to 7 percentage points reduction as the bracket that would result in a change to their business strategy. Less than one in five say they would wait until the reduction exceeded 12% before changing their strategy. Chart 4: If Scottish Government obtained control of the Corporate Tax Rate, what reduction (currently 26%) would result in a re-evaluation of your company strategy? * Chart 5: If Scottish Government obtained control of the Corporate Tax Rate, what reduction (currently 26%) would result in a re-evaluation of your company strategy? * (By turnover) % 27% 17% 0 3 percentage points 40% 35% 31% 4 7 percentage points 22% 20% 24% 8 11 percentage points Under 10mn mn Over 100mn * At the time of the survey, the corporate tax rate was 26% 16% 18%19% 12 percentage points plus 23% 18% 34% 25% 0 3 percentage points 4 7 percentage points 8 11 percentage points 12 percentage points plus The types of changes that companies would make to their strategies in response to lower corporate tax rates, once again exhibit an interesting split between optimism and pessimism. Some anticipate making positive, growth-focused changes to their strategies: one says a cut of 12% points or more would prompt the respondent s business to increase the level of capital investment into the Scotland and potentially review re-locating the headquarters to Scotland. * At the time of the survey, the corporate tax rate was 26% An analysis of these findings by the turnovers of respondent companies (see Chart 5) reveals a fairly even spread. While the largest companies with turnover exceeding 100mn would see little need to change strategy in reaction to a cut of 3% or less, they begin to respond much more actively once the reduction exceeds that level, with 40% of them saying they would change their strategy if corporate tax rates fell by between 4% and 7% points. However, other respondents view a reduction in corporate tax rates with scepticism. One consumer products business says that a corporate tax reduction of 4 to 7 percentage points would make it reduce staff if that were possible, adding: Who says that it is [really] a reduction, if an increase in tax take in total is required? Meanwhile, a property and construction business comments that a decrease of 4 to 7 percentage points in corporate tax rates would have the effect of reducing its turnover and causing it to cut staff numbers, because of the negative knock-on effects of lower corporate tax revenues on public sector procurement. The accompanying Ernst & Young Viewpoint panel discusses the strategic implications and options facing businesses if corporate tax rates we decreased. 7 Grasping the thistle: Ernst & Young s Scotland corporate tax survey report

9 Ernst & Young Viewpoint Peter Ames, Partner, Ernst & Young The survey results provide an interesting steer to Scottish Government as to how it might use corporate tax rates to successfully stimulate the Scottish economy. The findings strongly suggest it is not significantly lower rates but sustainably lower rates that would stimulate increased investment. Furthermore, a simplification of the regime (it is likely that respondents are not just referring to tax red tape ) would also be welcome and likely to lead to incremental investment in Scotland. The results of the survey suggest the policy objective of increasing investment is more achievable than might initially have been envisaged. This is because the survey indicates there is no need to compete with Irish rates of corporate tax (currently 12.5%, some 11.5 percentage points lower than the current UK rate). Instead, sustainably lower rates are key. Tax cuts should be funded by spending reductions Asked how the reduction in tax take resulting from a cut in corporate tax rates should be funded, our respondents are overwhelmingly in favour of these being funded through cuts in public spending. This is hardly surprising, given the widely held view in the business community that government expenditure as a whole represents too large a proportion of the economy. Chart 6: How should a loss of tax revenue be funded? 67% 8% 25% Increases to Income Tax Other devolved taxes Spending cuts For businesses making long-term decisions on investment, this means years if not decades of believably lower rates in comparison to the rest of the UK and internationally. For businesses to build this into their decision-making processes, Scottish Government will need a really strong reputation for economic credibility. This need also places considerable pressure on Scottish Government to effectively implement the tax collecting powers it already has under the Scotland Act. Grasping the thistle: Ernst & Young s Scotland corporate tax survey report 8

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11 but a separate Scottish tax system may be economically unjustifiable Wider tax changes and implications... Perhaps more surprisingly, there is an almost equally strong consensus that the administrative and financial cost of operating a separate tax system for Scotland would not be justified by the resulting economic benefit. As Chart 7 shows, almost two thirds 64% say a Scotland-only tax system would be economically unjustifiable (even if it is required under a future constitutional settlement). This finding is fairly consistent across different industries and both entrepreneurial and more established businesses, apparently reflecting widelyheld scepticism over the ability of government to get things done in a fast, effective and cost-efficient way. Chart 7: Do you think that the administrative and financial cost of operating a separate tax system could be justified by the economic benefit? Going forward, businesses may also need to navigate through other changes that may arise in the tax arena, again possibly affecting Scotland s international attractiveness. Asked what other measures might need to be addressed to increase investment and employment in Scotland, the respondents primarily favour targeted tax reliefs, followed by reforms to NICs and PAYE. Where respondents favour other measures, these include easier access to capital, policies to attract talent, and improved transport and other infrastructure investments. The potential future changes in the tax arena, and their implications for businesses, are discussed in the accompanying Ernst & Young Viewpoint panel. Chart 8: What other measures would need to be addressed to increase investment or employment? 36% 64% Yes No 28% 63% 38% 16% PAYE Additional targeted tax reliefs NICs Other These concerns seem to pick up on worries already arising around the practicalities of the changes to the tax regime set out in the Scotland Act. Under the legislation, Scottish Government, through Revenue Scotland, will take over the collection of Land and Building Transaction Tax and Landfill Tax in 2015 and will propose the rate of Income Tax in 2016, with responsibility continuing to sit with HMRC for collection. Before then, specific legislation needs to be passed and the relevant tax systems established. This timeline is extremely tight and the concern is that any problems or delays could impact confidence in Scotland as an investment destination. Ernst & Young s view is that there is an urgent need for Scottish Government to act quickly to communicate its plans to help alleviate the scepticism which currently exists, through proactive engagement with the Scottish business community. Grasping the thistle: Ernst & Young s Scotland corporate tax survey report 10

12 Ernst & Young Viewpoint Paul Gallagher Partner, Ernst & Young While the implementation of a new system to collect new taxes introduced by the Scotland Act undoubtedly represents a massive challenge for Scottish Government in many respects, it also offers a big opportunity. Having opted to go it alone by using Revenue Scotland, the collection process for these taxes and potentially corporate tax in Scotland need not be encumbered by the legacy systems of HMRC. Like those in many large organisations, these systems were introduced in a different era of IT functionality, and have struggled to keep pace with the rapid leaps in technology and connectivity over the past few decades. In contrast, a system being designed from scratch can be built to reflect the modern connected economy, offering easier access and greater flexibility to business and individuals in managing their own tax affairs. If Scottish Government can get this right it will not only serve the obvious function of collecting tax as cheaply and efficiently as can be managed, unquestionably a good thing in its own right, but will also justify the decision to create Revenue Scotland. It will also send a strong message about the economic credibility of Scottish Government, which is critical in securing the desired economic dividend from obtaining control of corporate taxes. This intangible benefit would be easily the most valuable prize available to Scottish Government in getting this right. include uncertainty over transfer pricing A specific concern and area of uncertainty over potential changes in corporate tax is the application of transfer pricing (a tax concept that seeks to ensure arm s length prices are charged between connected entities to avoid manipulation of where profits arise). Asked whether the issues associated with the need to apply transfer pricing across the border will be balanced by the benefits of having a corporate tax rate separate from the UK, the respondents are unconvinced, with the single most common answer being that they are uncertain on this point (see Chart 9). Chart 9: Will the issues associated with the need to apply transfer pricing across the border be balanced by the benefits of having a rate of corporate tax separate from the UK? 26% 41% 33% No Uncertain Yes 11 Grasping the thistle: Ernst & Young s Scotland corporate tax survey report

13 Interestingly, as Chart 10 shows, entrepreneurs are much more uncertain than larger corporates on the trade-off between the burden of managing transfer pricing and the benefits of a separate tax rate. This may reflect that they are generally domestically-focused businesses with less experience of crossborder trading or that they have no need to undertake transfer pricing. The accompanying Ernst & Young Viewpoint panel presents our analysis of the transfer pricing implications of a separate Scottish corporate tax rates. Chart 10: Will the issues associated with the need to apply transfer pricing across the border be balanced by the benefits of having a rate of corporate tax separate from the UK? 60 58% % 19% 37% 41% 37% 26% 23% 26% 10 0 No Uncertain Yes All Entrepreneurs Large corporates Grasping the thistle: Ernst & Young s Scotland corporate tax survey report 12

14 Ernst & Young Viewpoint Colin Pearson Partner, Ernst & Young The survey suggests that the Scottish business community is widely welcoming of the debate on the rate of corporate tax, and on the wider issue of how to make Scotland a better place to build economic prosperity. However, there is a further theme around how much this will cost and around how much of the benefits will be eroded by these costs and administrative burdens. Not a big bang but phased reduction Asked how any reduction in corporate tax should be introduced, the respondents voice a strong preference for a phased rather than immediate introduction (see Chart 11). Some interviewees also raise the issue of the time-lag between any tax cut which immediately reduces the government s tax take and its resulting stimulant effect on business investment and economic activity, which should eventually boost tax receipts to offset the initial decline in government tax revenues. Chart 11: How should a reduction in corporate tax be introduced? Such concerns undoubtedly reflect the difficulty there will be in unpicking 300 years of integration. Like many other aspects of the United Kingdom, many businesses in the UK are run on a highly integrated basis, not differentiating between a customer in the Western Isles or Kent. The cost of a business administratively pulling itself apart or at the least being able to report results as if it had could be enormous in terms of systems, management time, reconfiguring distribution systems, and the regulatory environment. Evidence that the general independence debate has created uncertainty can be seen in the recent statements by Scottish & Southern Energy, Scotland s second biggest company, which warned that uncertainty over the independence referendum will increase the risk it attaches to investment projects. 64% 36% Immediate Phased The company commented: The additional risk of regulatory and legislative change does not mean that SSE will not invest in projects in Scotland while its future is being determined. The development of SSE s existing projects in Scotland will continue as planned. It does mean, however, that the additional uncertainty represents increased risk, of which SSE will have no alternative but to take account in making final investment decisions on those projects while that additional uncertainty remains. It is likely that some of this ambiguity has permeated the thinking on the cost to business of dealing with an independent tax system for Scotland. 13 Grasping the thistle: Ernst & Young s Scotland corporate tax survey report

15 Grasping the thistle: Ernst & Young s Scotland corporate tax survey report 14

16 calling for early and proactive communication by government One factor that could reduce the lag between a tax cut and the subsequent boost to investment is clear communication from government of its future tax plans. Changing a business s investment plans is a long-term process and early warning of forthcoming changes can enable companies to start planning their reallocation of investment well in advance thereby bringing forward the beneficial effect of the tax reduction. Ernst & Young is an active participant in the ongoing debate over how the Scottish economy can be made more globally competitive and prosperous. Our recent contributions include a research paper from the Ernst & Young Scottish ITEM Club examining the wider economic impacts of possible changes to corporation tax rates in Scotland. The accompanying information panel presents an excerpt from the report s concluding section. Ernst & Young Scottish ITEM Club: the economic effects of corporate tax changes in Scotland Both the politics of the situation and EU regulations on state-aid mean that the revenue consequences of differential cuts in the corporate tax rate in Scotland would have to be borne by Scottish Government s budget. For example, a halving of the corporate tax rate in Scotland would mean an initial hit to the Scottish budget of 1.55bn 5% of the total. This is hard enough in cash-strapped times when corporate animal spirits are depressed and so the timing of the benefits in terms of increased investment is even more uncertain than usual. But recognition that the flowback in terms of higher receipts from other taxes would largely accrue to the UK Exchequer given its continuing control over VAT and excise duties rather than to the Scottish budget is surely the key impediment. Scottish finances would only benefit to the extent that the proposed Scottish element of income tax and local taxes such as business rates and council tax are higher than they would otherwise be pushing the breakeven point for the Scottish budget far out into the future. Finally, none of this would be happening in a vacuum. The need to attract investment and spur growth is a theme being played out across the developed world. In the medium term, as public finances normalise, reductions in corporate tax rates are likely to be a high priority for any tax cuts that become feasible, so the benefit of a unilateral move by Scotland (or Northern Ireland for that matter) might be very short-lived and well-below what would occur without retaliation. 15 Grasping the thistle: Ernst & Young s Scotland corporate tax survey report

17 Any reduction should apply to all companies though some favour a sectorbased approach Alongside a phased approach to the implementation of any corporate tax reductions, the businesses we interviewed are also strongly supportive of any reductions being applicable to all companies in Scotland, not just those in specific sectors or geographical regions. As Chart 12 shows, over three-quarters of the interviewees take this view, reflecting the widespread support for simplification of the tax regime, rather than changes that would add further complexity. Rejecting reductions based on geographical location, one respondent commented: Scotland is too small for such tinkering and any attempt to do so will lead to increased costs in bureaucracy and administration. Chart 12: Should a tax reduction be applicable to all companies? 76% 24% No Yes Among those who think future corporate tax cuts should not be applicable to all companies (24% of respondents), a majority of these 87% believe that a reduction based on sectors would be a better solution. The sectors that these respondents favour most strongly for tax breaks include life sciences and tourism, followed by oil and gas (see Chart 13). It should be noted that given EU rules restricting sector-based changes, the scope for these may be significantly limited. Chart 13: Which sectors should receive a reduction? Life sciences 50% 50% Tourism and hospitality 43% Oil and gas/ Oilfiled services 24% Food and beverage Engineering 17% 17% Professional services 10% Financial services Agriculture 2% Grasping the thistle: Ernst & Young s Scotland corporate tax survey report 16

18 Conclusion: a key issue but an uncertain one As our research underlines, the momentous changes that are now potentially in prospect for Scotland both as a nation and as an economy mean the outlook for corporate tax is significant for business leaders across the country. While changes to the corporate tax regime are not included in the Scotland Act, there is clear possibility that these could come further down the road through the Act s power to devolve additional taxes through secondary legislation. The absolute benefits of more fiscal autonomy cannot be measured by legislative and financial changes alone. I can see from the SME culture in particular that a confidence will grow from having more control in Scotland. Given the long-term nature of businesses tax and investment planning, this is a possibility that they need to consider now, in order to position themselves for these changes if and when they come. The verbatim comments quoted here from our respondents confirm that some are doing this. The Government will need to think through the full effect of companies moving their head office to Scotland to take advantage of lower corporate tax rates. If they can get additional revenue from Income Tax and NI for additional locally employed staff that may well compensate for any reduction from the current corporate tax collected. 17 Grasping the thistle: Ernst & Young s Scotland corporate tax survey report

19 As well as underlining that corporate tax is high up the agenda of the business community, our study also reveals a divergence of views on the pros and cons of a separate rate for Scotland, and widespread uncertainty over its practical implications. Key themes do emerge however, with a general consensus being that businesses desire a sustainably lower corporate tax rate without the pitfalls of more complexity or additional administrative effort in collection. We hope and believe that the insights and analysis in this report will help companies form a clearer picture of the implications and options facing them. As the Scotland of the future continues to be discussed and take shape, Ernst & Young will stay in the forefront of the debate, helping businesses active in Scotland whether domestically or internationally-based to prepare themselves to operate and succeed within that future. This report is the latest step in our ongoing efforts to do this. Some of the questions assume a reduction in tax rates is a given. I don t agree this is the case. A close scrutiny of the public funding available and the state of the key locations viable for corporate investment mean that any cut in tax rate will hinder development of infrastructure to make Scotland truly attractive to external investors. There are a number of key issues and I am pleased to see Ernst & Young starting a dialogue. I hope this develops to a direct set I d discuss with the Scottish Government. Grasping the thistle: Ernst & Young s Scotland corporate tax survey report 18

20 Ernst & Young LLP Assurance Tax Transactions Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited. Ernst & Young LLP, 1 More London Place, London, SE1 2AF. Ernst & Young LLP Published in the UK. All Rights Reserved. In line with Ernst & Young s commitment to minimise its impact on the environment, this document has been printed on paper with a high recycled content. Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Ernst & Young LLP accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material. ED indd (UK) 09/12. Creative Services Group Design.