BUSINESS leaders today claimed the SNP's plans for a local income tax to replace the council tax were "fatally flawed".
CBI Scotland said the flagship policy face a major hurdle because the Scottish Government had no power to require employers to collect the new tax.
The claim came as Finance Secretary John Swinney prepared to publish the government's consultation
document on its local income tax proposals this afternoon.
The plan to scrap the council tax and introduce the new tax, set at 3p in the pound across Scotland, was one of the SNP's key manifesto pledges at last year's Holyrood elections.
But the policy has already been dealt a serious blow by indications from HM Revenue & Customs that it will not help collect the tax.
And now CBI Scotland director-general Iain McMillan has added to the pressure on ministers with his warning about their lack of powers.
The local income tax would have to be collected from salaries and wages, unlike the council tax which is collected by councils.
But Mr McMillan said: "While accepting local taxes are devolved to the Scottish Parliament, what is absent from the Scotland Act is authority for Scottish ministers to require the Revenue or employers to collect the tax from them.
"The Act also makes it clear the Scottish Parliament cannot pass legislation which has an effect or impact outside Scotland – for example, employers in England having to collect the tax from Scottish-based staff."
HM Revenue & Customs has said it is responsible for collecting national taxes, not local ones and the proposed new tax is a matter for the Scottish Government.
Mr Swinney said discussions were still to take place with Revenue officials.
The chances of the plans for a local income tax being approved by MSPs are still not clear.
Mr Swinney has been holding talks with the Liberal Democrats, who also want a local income tax but argue councils should have the power to set their own level.
A spokesman for Mr Swinney described a 45-minute meeting with Lib Dem finance spokesman Tavish Scott last night as "extremely useful". And the pair have agreed to have further discussions.
But even if they can secure Lib Dem support, the Scottish Nationalists will struggle to get a majority in the parliament for the change.
The two Scottish Greens have indicated they are unlikely to back the new tax.
And both Labour and the Tories are firmly oppose to a local income tax, with Labour leader Wendy Alexander warning it would have "disastrous consequences".
A spokesman for the First Minister today played down the CBI's concerns.
He said: "All these practicalities were gone into in terms of the tax-varying powers of the parliament ten years ago.
"It would be to everyone's convenience for HM Revenue & Customs to act as the collection agency and use the existing machinery, which would free up an enormous amount of money currently tied up in collecting the council tax."
The full article contains 502 words and appears in Edinburgh Evening News newspaper.
