A leading property company has warned that Scottish tax differentials could scare off real estate investors in the economy.

Danny O’Neill founder and chief executive of Ediston, says costs can be higher North of the Border under the Land and Buildings Transaction Tax, and the proposed land tax would make matters worse. “That is not a good thing, because investors are nervous about different taxes on buildings in different locations.”

He went on: “The suggestion by the Scottish Government that councils should tax land that wasn’t developed because developers and housebuilders were holding land back I find astonishing.”

He said developers might hold land as a future development pipeline, but “to suggest we would own land and sit on it and not do anything with it is not how the market works”.

Mr O’Neill added: “Taxing land is a huge risk for the Scottish government and for the market, I hope they reflect on it before making any decisions.”

Rodney Whyte of Pinsent Masons, the law firm behind Out-Law.com, said: “The threat of a tax on development land could actually have the effect of deterring investment in residential development in Scotland, particularly by companies with cross-border operations and opportunities, and may have the effect of reducing the prospects of development of sites particularly those which are marginal.”

Mr Whyte added: “Before consulting on a solution, the Scottish Government must be careful to establish that there is in fact a problem, the scale of that problem and the underlying reasons for it so as not to exaggerate the issue or introduce a potentially disproportionate and counter-productive measure.”