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\’Lower taxes needed\’ to boost economy – Telegraph

Simon Johnson
Daily Telegraph, 18.3.08

Scotland could boast one of the world\’s most successful economies if taxes were lower than in the rest of Britain, a report by a major new think tank claimed today.

Reform Scotland also urged a smaller and more efficient public sectorand for more fiscal powers to be transfered to Holyrood.

However, for Scotland to become one of the world\’s richest countries it average growth would have to almost double to 3.5 per cent each year for the next decade.

The report came as a tax expert warned some of Scotland\’s leading wealth creators would leave to avoid being punished under teh SNP\’s plans to replace a council tax with a local income tax.

Ben Thomson, chairman of Reform Scotland, said today\’s report aims to examine why Scotland\’s growth rate lags behind other countries and different parts of the UK.

He said: "If Scotland aspires to match the most successful economies, there are additional benefits to be gained from a system that is diffentiated from eth rest of the UK and provides Scotland with a real platform for higher economic growth.

"This would mean that teh higher revenues resulting from higher economic growth would stay in Scotland and not return to the Treasury.

"At present public spending in Scotland is largely governed by a block grant from Westminster.  Raising revenue in Scotland would also provide an incentive for greater control of public spending." Reform Scotland, is a new independent think tank comprising prominent businessmen whose objective is to influence political opinion on ways of delivering higher economic growth and better public services.

Its first study, Powers for Growth, suggests that sweeping changes are needed to improve growth, which over the past 30 years has averaged 1.8 per cent.  It highlights a series of measurements that show Scotland is "moving in the wrong direction", including declining productivity and some of the highest public spending levels in Europe.

The report recommends lowering the overall tax burden, which it claims would spur investment and encourage new businesses.

It welcomes teh Executive\’s decision to cut business rates but urges SNP ministers to go further with the powers they already have.  The study finds Scotland is amongst the European countries most dependent on the state and recommends significant cuts in public spending as a share of GDP.  Centrald and local government need to be made more efficient and public services shoudl be delivered in different ways.

But, for the first two recommendations to be realised, Scotland would need greater fiscal autonomy, allowing Holyrood to lower taxes.

The report was published as Russell Hills, head of tax in Scotland for KPMG, warned the SNP\’s plans for a local income tax set at 3p in the pound would create a new class of "non-doms" – people who would in Scotland but live elsewhere.  Mr Hill said some leading businessment would move to England or abroad to escape the charge, which would see their bills for local services soar.