IoD chief takes swipe at Salmond's 'risky' local income tax plan

SNP plans to abolish council tax and replace it with a local income tax would be a "real problem" for business, the head of one of Britain's leading business organisations has warned.

Miles Templeman, director-general of the Institute of Directors (IoD) also criticised the Nationalists' aim of having a different corporation tax level north of the Border as "very disruptive for business".

Although Templeman praised devolution as a "positive force for business", his views are the latest in a series of attacks on the SNP's flagship policies by senior business figures.

Speaking on a visit to Scotland, he told The Scotsman: "A local tax we tend to think is a risky path that may lead to problems that aren't advantageous. We'd rather not go down that route."

According to the IoD chief, both a local income tax (LIT) and a separate rate of corporation tax would lead to a differential rate that would cause inequalities across the UK.

Templeman's attack came just days after the Chancellor, Alistair Darling, labelled plans for the tax "a disaster" for Scotland's financial services industry.

The intervention of such a senior figure will put further pressure on the SNP, which is pressing ahead with its plans to abolish council tax and replace it with an income tax capped at 3p in the pound.

And the SNP, under First Minister Alex Salmond, is also committed by its election manifesto to cut corporation tax in Scotland to 20 per cent, 8 per cent below the current UK rate.

Templeman admitted that Scottish companies would benefit from having a lower corporation tax than the rest of the UK but he dismissed it as being "unrealistic" and unfair to companies in England.

"Then we'd have all the companies in the north-east (of England] saying, hey, we are next door to a different tax regime."

Instead, the IoD is calling for a reduction in corporation tax across the UK.

He said: "It is unrealistic within the UK to have different rates. But I still do strongly feel it should be lower rates overall."

The same problem of a differential corporation tax would apply to differential local income tax, Templeman argued.

And he warned that the SNP's plans to scrap council tax in favour of a LIT made the IoD "very nervous".

He added: "Not that council tax is a great tax. However imperfect what we have got is, to go further not might be the best idea."

Templeman argued a local tax variation would make the tax system more complex.

"You end up with complications – and that is a bad thing."

Despite these reservations, Templeman said he had been impressed with the SNP's business-friendliness and their performance. "The SNP has done a good job on that. They have made it very clear and I think, 'good for them'."

Templeman, who spoke to The Scotsman as he travelled to Stirling to address a team-building competition, also came out in favour of further devolution. Although he ruled out independence, devolution was "a positive force for business" and devolving more power around the UK was "a good thing".

At a business conference held in Edinburgh last month, Salmond insisted the 3p income tax has "huge popular resonance and support". He said a swap would represent a £280m tax cut.