Parties aim to strike deal on 'Tesco tax' proposals

The SNP's plans to raise 30 million from a levy on large retail premises were defeated by Holyrood's local government committee when the opposition parties united to vote it down.

However, Finance Secretary John Swinney vowed to put the tax plan before the full parliament for a vote next week.

Talks are now expected to take place between the SNP and Labour over the next few days in a bid to find common ground. Labour indicated it was not opposed in principle to taxing big business, but were concerned the SNP's proposal was focused too narrowly on the retail sector while not applying, for example, to banks.

Another possible area for compromise could be a commitment by the government to earmark the revenue raised for particular purposes.

MSPs last night voted 62 to two in favour of the general principles of the Scottish Government's 33 billion budget for 2011-12, allowing it to be considered in more detail in committee next week before the final vote on February 9.

The proposed retail levy was originally presented as a tax on large out-of-town supermarkets, but it also hits large city-centre stores.

Defending the proposal, Mr Swinney said: "I considered it necessary to look at options to raise a small amount of income through business rates.

"We will continue to press the case that those with the broadest shoulders should bear more of the burden."

Edinburgh North & Leith Labour MSP Chisholm - whose constituency includes Princes Street - voiced concerns about the effect of the tax if it targeted city-centre shops.

He said: "I had a meeting this week with John Lewis and they pointed out one of the consequences would be the withdrawal of large stores from the Business Improvement District initiative. It would be town centre regeneration in reverse.

"I do support the need for extra taxation on big businesses but what the Cabinet Secretary must do is spread that over a much wider range of businesses."

Mr Chisholm, a member of Holyrood's finance committee, said Labour's opposition was not to the idea of taxing big business but the fact it was narrowly focused in a way which would damage town centres.

Lib Dem finance spokesman Jeremy Purvis branded the levy "the SNP's Princes Street penalty". He said: "This is an arbitrary tax on retail business and in many cases simply irrational. The Finance Secretary will hit Jenners and John Lewis, but not Tesco Bank."