Corporation tax: put us out of our misery

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The Financial Times (£) carries a blunt warning from Bombardier, Northern Ireland’s largest employer, that it will lose its ability to invest in the province unless the end of regional aid at the behest of the EU is offset by a cut in corporation tax. This gets down to the bottom line after years of teasing on the subject. (Incidentally has any other news organisation bothered to report this? I can find nothing on line).

The FT also reports:

Long talks between the Northern Ireland executive and Treasury officials agreeing the formula to calculate the cost of cutting the rate are expected to conclude on Thursday.

What then? With both front benches at Westminster cool on a cut, will any minister in any legislature have the guts to come out and confess the idea is dead?  Or suddenly, that it’s a goer for NI and a pro-Union sweetener for Scotland as the referendum campaign is launched?

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  • Glenn B

    The situation solution in this case, is to highlight the devastating implication to Northern Ireland by the EU Commission present stance, and have them mitigate a change of though then policy?

    It is essential that NI PLC has the ability to attract foreign investment by offering regional aid especially in this post conflict, dire economic era? Project or company expansions with job creation are the solutions to not just the woeful economic times but also a major building founding to eradicate social differences borne from our shared Troubles.

    Northern Ireland must continue as an automatic assisted area status generating government assistance to woo foreign investment throughout all counties and this should be a priority for all politicians, not just our MEPs. Has anyone been successfully doing this?

    The EU must continue to support this region’s business recovery and lead HMG & IG by example.

    Westminster will not reduce Corporation Tax as a balance against the loss of Regional Aid. It is imperative that Regional Aid continues and the lobbying for Corporation Tax reduction also continues for the bone-fide reasons known.

  • Old Mortality

    If Bombardier relies on aid to make its Belfast operations viable, then it ought to be taking a look at how to make them profitable without. If that means wage cuts, so be it. I’d give their pleading more credence if they would disclose what their effective corporation tax rate actually is.

  • http://cork2toronto.blogspot.com Mark Dowling

    “a blunt warning from Bombardier, Northern Ireland’s largest employer, that it WON’T WANT to invest in the province unless the end of regional aid at the behest of the EU is offset by a cut in corporation tax.”

    fixed the post above, and since I don’t feel like paying the FT I hope what I’m fixing is the FT’s reportage rather than BW’s distillation thereof.

    As for Bombardier, their extensive use of government subsidies in Canada (where for example BBD persuaded the Canadian Export Development bank to advance it a loan for a purchase of airliners by a domestic carrier) shows them to be avid consumers of corporate welfare.

  • http://www.wordpress.ianjamesparsley.com IJP

    Old Mortality

    Have to say I disagree entirely. “Wage cuts”, seriously? We are already the poorest paid people in the British Isles!

    Absolutely on the contrary, our businesses need to start paying more.

    The 43% wage gap between public and private sector is often quoted as the reason our best people generally end up in the former. Then the argument becomes that the public sector should pay less. Perhaps – but at least as much to the point, the private sector should pay more, thus attracting people to work for it and enabling growth.

  • iluvni

    IJP,
    which party are you in now so as I know to write them off completely?

  • aquifer

    Sammy Wilson hates to think of us paying less British taxes than Finchley so forget about corporation tax and sell your house while you still can.

  • BluesJazz

    BW
    ‘put us out of our misery’?

    We’re the most heavily subsidised region in Europe-(the World).
    And yet , we feel hard done by? OK shite weather, but 2015 (major cut in block grant) is going to hit deep and health will be the major loser.
    Education will continue to be subsidised by the segregated system and failing schools will largely survive intact. despite the falling intake.
    Health will have a higher intake and (because it isn’t segregated) smaller budget.

    Message from Stormont: Don’t get old or ill. But you’ll get that Message in English, Irish and Ulster Scots.

  • Old Mortality

    IJP
    It doesn’t necessarily have to be achieved by pay cuts. Higher productivity (whatever that is) and longer hours with fewer jobs might do the trick. However, if Mark Dowling is correct, and Bombardier have a subsidy habit, perhaps their threats should not be taken too seriously.
    Businesses just can’t pay more because the public sector sets a benchmark. Public sector pay needs to fall quickly, at least in real terms but if the local politicians are terrified of offending benefit claimants, they are even less likely to risk upsetting the huge army of public sector employees.
    The man benefit from reducing corporation tax is that public spending would have to fall as well and one would hope that a freeze on public sector pay would be a beneficial consequence.

  • http://www.wordpress.ianjamesparsley.com IJP

    iluvni

    Nothing like taking on an argument on its own merits, eh?

    In my life, I’ve voted for two parties first preference or ‘X’ (as well as an Independent candidate endorsed by both).

    I suspect that’s actually below average – and I’d hope so, otherwise democracy would be in very bad shape.

    Now, how about the point?

  • http://nalil.blogspot.com Nevin

    Trimble-Newby exchange in the Lords:

    Lord Trimble (Conservative) My Lords, will the Minister tell me whether the Government have obtained assurances from the European Commission that it will not regard this as unlawful state aid? If they take that view, there is absolutely no point in taking it. In view of this issue, can he also say whether it would not be better to accelerate the Government’s programme for reducing corporation tax generally?

    Lord Newby (Liberal Democrat) My Lords, the Government are reducing corporation tax and in a relatively short period it will be down to 22%, which makes the differential between Northern Ireland and the Republic that much less than it was in the past. I can assure the noble Lord that, as long as the Azores principles are followed, this will not constitute a call on state aid.

  • The Raven

    “Businesses just can’t pay more because the public sector sets a benchmark. Public sector pay needs to fall quickly”

    Really? Why couldn’t it have fallen slowly? Where was the planning in place to manage this economic changeover? Who was finance minister when the first bluster about slashing the public sector came?

    The Assembly have had ten years to put something…ANYTHING in place to manage the changeover from a public-led to a private-led economy. And yet…nothing. Public sector pay is already frozen, if I recall correctly.

    And yet I always wonder why the problem with pensions is “they’re getting too much”. Why the problem with rights for expectant mothers is “themmuns in the public sector get too long off”. Why the problem with wages is that the public sector gets paid too much.

    The first question I get asked in my current job is not “I need help with sales/marketing/what software do I need/do I need an online strategy”…it’s “be’s there any grants going?” because such and such down the road got a grant 30 years ago to start up.

    The private sector here needs to take a long hard look at itself here and ask what direction it wants to go in. Because at the end of the day, 1000 less civil servants might mean your business rates come down (oh and let’s not get into landlord shysterism, because they cost a business far more than the rates ever will) – but it won’t increases your sales or ability to export.

    Time – like everything else in this country – to have a little less of themmuns and us-uns, less inward-looking parochialism, and a little more creativity, innovation and get-up-and-go.

    It’s always “some one else’s fault” in Northern Ireland…

  • http://www.thedissenter.co.uk thedissenter

    Well IJP, either the private sector pays more (seriously, most of it in NI already on its knees) or the public sector is paid less – or an entire layer (or two) is (or three) taken out. That improves productivity. Think this was behind fleeting reference to regional public pay disparity. In a fiscal union you either compete on currency and value/productivity or wages on value/productivity. Why do you think one of the first actions taken ref Troika by the RoI was to reduce public sector pay?

  • http://www.thedissenter.co.uk thedissenter

    Sorry Ian, that started on a thread of thought and ended up on a wider point. Delete *Well IJP*.

  • leftofcentre

    Is there any proof that Bombardier actually pay tax here? I would expect like most corporations they do all kinds of moves to pay the bare minimum.

    The simple fact is in today’s world multinational companies pay very little tax.

    Some sources:
    Starbucks ‘pays £8.6m tax on £3bn sales’
    http://www.guardian.co.uk/business/2012/oct/15/starbucks-tax-uk-sales

    Amazon paid no corporation tax on profits generated by last year’s UK sales of £3.3bn
    http://www.guardian.co.uk/technology/2012/apr/06/tim-waterstone-attacks-amazon-tax-avoidance

    Taxes are now for the little people.

    I have been self employed my whole life and I am completely against the lower tax rate for NI, it will do zero for investment for the simple fact that most big companies now pay zero tax never mind low taxes.

    Check out the Double Irish With a Dutch Sandwich:
    http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html

    Our politicians know sod all about business so they cling to these catchy campaigns as its easier for them to get their heads around them.

  • aquifer

    Why are public jobs here jobs for life?

    To get them to keep their mouths shut obviously.

    Lets have time limited employment contracts for the public sector to make sure that the secret stupidities are allowed to escape.

  • The Raven

    Aquifer
    They’re not. I have three mates all of whom have finished their contracts in the last four or five months.

    Dissenter
    …none of which address the problem from a private sector point of view. Also, social pacts have been running for years, well before current economic troubles. Where was the drive to instigate similar actions ten years ago from Stormont? They’ve had the time, they just haven’t had the brain capacity.

    Public sector = a rather easy little target for those not in it to take a pop. I wouldn’t take double my pay to do the jobs some of them do.

  • Old Mortality

    Raven
    ‘I wouldn’t take double my pay to do the jobs some of them do.’
    Maybe, but obviously a lot of people are less squeamish than you. When you’ve got 50 candidates for each position, as was the case the last time the PSNI recruited, you might wonder whether the pay is a bit higher than is necessary.

  • sitarman

    Bombardier opened a plant in China a couple of years ago and are opening a plant in Morocco soon. I believe the Morocco deal includes free land, no corporation tax for 5 years and 8.5% for 20 years after that! Also the average wage there is £202 per MONTH. How do you compete with that?

    Old Mortality, the average retail job attracts around 66 candidates, an office job about 50 candidates.

  • MiddleIndex

    So if England are allowed to take powers back from the EU, is it out of the question then for Northern Ireland to ask for control of their corporation Tax?