A currency union with an independent Scotland that was determined constantly to undercut its corporation tax rate would be unacceptable to the UK, according to Coalition sources.
The Scottish Government has expressed a desire for an independent Scotland to keep the tax rates on company profits lower than the remaining part of the UK if it secures a Yes vote in next year's referendum.
Pro-Union opponents have denounced such a proposal as a "race to the bottom".
Meanwhile, Alistair Carmichael, the Scottish Secretary, has insisted the SNP Government has been making assertion after assertion on the currency union, which was misplaced.
"Nicola Sturgeon asserts that an independent Scotland would have a member of the Monetary Policy Committee [MPC]. Why? What precedent would there be for that? None," he declared.
He stressed how there had never been an appointment to the MPC on a geographical basis.
"You would still want to appoint people on the MPC who were there for their expertise rather than to represent some national or sectoral interest.
"If you started to appoint people to the MPC to represent some national or sectoral interest, then you change radically, fundamentally, the nature of the MPC.
"So is the rest of the country going to rewrite the MPC, which works very well in its present constitution, to accommodate Nicola Sturgeon?"
He argued that the suggestion that the Bank of England would treat the Scottish member of a currency union with England with equanimity was wrong; noting how the clue was in the name.
Mr Carmichael, re-emphasising how a currency union was "highly unlikely", added that the only way Scotland could be sure of being a member of a currency union with the rest of the UK was to remain part of it.
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