When John Swinney announced his draft budget last year he didn’t have many rabbits to pull out of the hat, but he did manage to pull a chicken from the shopping trolley. The announcement that an extra charge would be levied on companies with a rateable value greater than £750k seemed to come as something of a surprise to the public and to the retail industry. It wasn’t long before it was dubbed the ‘Tesco Tax’ and formed one of the main dividing lines between the Government and opposition parties.

For me, trying to balance Scotland’s economy and maximise jobs in these tough times means that those with the deepest pockets need to pay a bit more. This could mean higher income tax rates for top earners, a super-tax for energy companies that make super-profits and targetting companies like House of Fraser, Asda and Tesco, the latter of which makes £6k profit a minute. Of course, the Scottish Government only has powers to implement one of the above so it is little surprise that the Finance Secretary has taken this option.

However, like so many last ditch challenges, the legality of the situation has been called into question.

The challenge seems to be that a Government cannot employ favouritism in the system. That is, the SNP cannot penalise the larger companies without equally penalising the smaller companies. I can’t say I fully understand this problem in light of arrangements that already exist in the system.

The scrapping of rates for small business in Scotland is a prime example of ‘favouritism’ and, working the other way, so too are Westminster’s plans to make rich students in England and Wales pay much higher fees than other students. Replace Hooray Henry for Tesco and you’ve got the same situation. I don’t see how the Tesco Tax can flout EU rules if the two-tier tuition fees don’t.

But how can one comment on the suggestion that a Government policy breaks an EU law and how can clarity be assured before a vote takes place on the matter? You probably can’t but opposition parties still have the ideal fodder to hide behind if they want to vote against (remember minimum pricing and Local Income Tax were both vaguely mooted as breaking EU rules before being voted down)

At the end of the day though, this aim to raise £30m from the 0.1% richest companies surely won’t be seen as a losing approach for the Scottish Government and opposition parties will find themselves in a difficult position of backing large, profitable companies while still claiming to be on the side of those who are struggling.

An EU legal ruling may help to save their bacon and, well, every little helps but progress needs to be made this week if a decent budget is to be passed by Parliament.

It is telling that Labour leader Ed Miliband’s hollow argument against VAT rising to 20% from midnight tonight extends only to families being hit and an alternative-free assurance that he wouldn’t make the same decision in David Cameron’s position. Yes there is a need for the entirety of the coalition’s policies being tested for the existence of progressive merits but, in isolation, there is little to argue against a VAT-rise.

Ed calls it “the wrong tax at the wrong time”. He of course has to take an opposition stance at these times but nonetheless this soundbite seems a little too strong. What is the “right” tax and, given our record deficit, when is the “right” time? With Corporation tax decreasing and income tax rates staying resolutely in place due to our Governments past and present being too timid and too ideologically stuck to alter them, it was always going to be VAT that had to move.

Noone enjoys paying tax but a misdirection created by something rising is the suggestion that the previous level, the status quo if you will, is more likely to be correct because it is what people are used to. However, a VAT rate of 20% brings the UK more in line with rates in Austria, Belgium, Czech Republic, France, Germany and Italy and still a good 3-5% below Sweden, Finland, Norway, Iceland and Denmark. Maybe we’ve had too good sales rates for too long a time and, to coin a few phrases, ‘we could not go on like this’, ‘we’re all in this together’ and ‘are you thinking what Merkel/Sarkozy/Berlusconi’s thinking’.

It is quite clear that had Labour won a fourth term, with or without coalition assistance from the Lib Dems, that VAT would have increased at some point during this parliamentary term. There are simply too few other palatable measures that Gordon Brown and/or Ed Miliband had at their disposal to plug the deficit. This likelihood is further compounded by the lack of explanation in the Labour manifesto as to how the party aimed to fulfil its promise of halving the(ir) deficit.

I don’t like the sight of students having to triple the amount of fees they pay each year, I don’t like the sight of charities having to close down at a worrying rate and I don’t like corporation tax decreasing when super-profits still exist for numerous British companies out there, but the nececssity of an increase in VAT when your finances are in such a parlous state, without cutting jobs, is difficult to avoid.

(And yes, this all puts the Liberal Democrats in yet another tight spot but there is a difference between overpromising/underdelivering and bringing in a policy that is actually quite reckless. Thankfully it is only the former, this time)

I am thoroughly enjoying the ongoing debate over what powers a devolved Scotland should and should not have, particularly the discussion surrounding Corporation Tax given how crucial and fragile the economy is at the moment, north and south of the border. Former BOS Chief Executive Sir Peter Burt is the latest to lend his opinion on the matter and it is pleasing to see that he is backing Scotland to set its own rates.

Opponents to the suggestion that Scotland should set its own corporation taxes tend to immediately point to Ireland and the supposed result of the low 12.5% that was, and still is, applied to companies over in the Republic. It is classic ‘post hoc ergo propter hoc’ philosophy to suggest that just because Ireland had a low Corporation Tax before it sunk into a deep recession, then that said tax was a significant driver for the current malaise. It was, of course, the banks’ misreading of risk and heavily-impaired real estate assets that were the main problems.

There is of course a risk that a race to the bottom takes place of Scotland is allowed to set lower rates. Ireland had a 12.5% tax rate to kick-start the Celtic Tiger, Scotland then brings in 12.5% to drive its economy ahead of the rest of the UK and then England, Wales and Northern Ireland feel they have to follow suit and suddenly it’s a Sterling vs Euro issue that tears the continent in two. A scorched earth tax policy with all players too cautious and too poor to move back to a correct level.

Nonetheless, I say Scotland’s needs and opportunities make it worth going for and the beautiful diversity of these shared isles can once again be harnessed to maximise the Laffer Curve for the UK’s benefit. If George Osborne’s preferred 24% is closer to the correct figure for tax rates then it will quickly become clear when Scotland has an anaemic 12.5% and few new jobs to show for it. We already have a drive towards nuclear power down South and a drive towards renewables up North, we have a drive towards high fees down South and a continued drive towards state-funded education up North so we can continue this devolution adventure and experimental settlement by maintaining tax rates as they stand in England and Wales but reduce rates in Scotland to ascertain what that flexibility will do for the UK and then, if necessary, act accordingly, either through rUK following suit or Scotland lifting rates higher again with the strategy deemed unsuccessful.

As things stand, why would a large company base itself in Scotland when it can be snugly located outside London with the vast travel options that Heathrow, Gatwick and Stansted provide? RBS has long been expected to pack up and head South, it is even sneered at in the City for having its base up in ‘Jockland’. Such attitudes don’t shift easily and will regrettably deter emerging entities from basing themselves in Scotland. Furthermore, the destinations that Glasgow and Edinburgh from its airports offer pale in comparison to the capital cities of small-medium sized capital cities across Europe. Scotland is uniquely disadvantaged by its position within Europe and its situation as a state within a country and some sort of flexible solution is required within the devolution settlement. The Scottish Government cannot be expected to grow the economy, and blamed for not doing so, when it doesn’t have the necessary tools and does not have oil revenues to use to its competitive advantage.

Of course, were the eminently sensible policy of fiscal autonomy to be granted through this coming Scotland Bill then devolving Corporation Taxes would come with it but it looks increasingly unlikely that the federal Liberal Democrats will leverage its position within the coalition. A solution to the current constitutional imbalance and problems with the Barnett Formula will continue it seems.

It is difficult to have a low tax nation with a large public sector and a relatively high minimum wage but that is a balancing act that Scotland can learn, and achieve, in time. There is more to gain from a distinctly Scottish business market setting distinctly Scottish rates of corporation tax than there is to lose.

Scotland can reap similar benefits as Ireland while being wise to any potential pitfalls. Lower taxes, higher growth, more jobs and a prising away of the Scottish nation from the distant cash cow of the City of London. Even former RBS chiefs agree it is a good idea. We just need a way to Make It Happen.