Friday, November 18, 2005
Hain: desireablity of an island wide economy
Peter Hain talks to Nialll Stanage about the desireability of an all island economy. Scoop of the month, I’d say!
In future decades, it is going to be increasingly difficult to look at the economy of north and south except as a sort of island of Ireland economy. We are deepening north-south cooperation in a number of areas. The Northern Ireland economy, though it is doing better than ever in its history, is not sustainable in the long-term. I don’t want the Northern Ireland economy to be a dependent economy as it is now, with a sort of UK, ‘big brother’ umbrella over it. It needs to be much more self-sufficient, so that’s what we’re trying to do.
But that was only part of what he said. More later.
Mick Fealty @ 11:32 AM
It should be pointed out that low corporate taxes are only beneficial for a Foreign Owned Company if they leave the post tax profits in the jurisdiction of the low tax. As soon as the company repatriates such post tax profits then it is clobbered at its home rate thus destroying any benefit.
However this was ingenious by the ROI Govt as what it meant was that foreign owned manufacturers left the money in the ROI to finance the R&D;jobs as well.
Thus the Republic got the blue collar workers as well as the white collar scientific jobs.You have to take your hat off to them.
However I can see why the Republic did this and it could be argued that any of the UK regions (if they were separate countries) would probably follow suit.
However a Govt has to raise tax somehow so if Corporates are not paying their fair share (and at 13.5% they are not in my opinion) then others will.
VAT is 21% against 17.5% in the UK, Higher Rate income Tax (I think 42%) kicks in much earlier than the UK 40% and Stamp Duty is horrendous (from memory rising to as high as 9% ?.All of this can depress the value of take home pay and thus create wage inflation pressures. Once again the Republic has avoided this and I can only assume it is in large part due to recent immigration there ?
Anyway if NI is going to enjoy other UK benefits then it has to pay its whack.
I dont think you can play around with ‘Federal Rates’ - it would create crazy distortions and anomolies.
However I think you can have tax breaks - eg Post Agreement we had 100% accelerated Capital Allowances and although this did not mean less tax it did improve cash flow.
I think this scheme could be extended and enhanced by say increasing such Allowances by 50% for NI Fixed asset investment as is already done for R&D;expenditure.Therefore Tax Breaks that either defer or reduce ultimate tax paid should be targeted at areas of need.
The whole tourist industry in NI is way under developed for instance.
ie NI plc needs to recognise where it is weak and then regional NI Govt assistance via Tax breaks and targetted assistance should be made.
There is no case, IMHO, for messing about with ‘Federal’ Tax Rates.
There are no quick fixes to improving the fortunes of an economy which has emerged from 30 years of unrest and terrorism and continues to suffer from the aftershock of old industry decline.
However many of us are committed to doing it and if Hain has neither the stomach, imagination nor inclination then he should go
Posted by on Nov 21, 2005 @ 10:47 PMJohn
I think that simply by reducing government employment a bit is good for the private sector because it releases people who would otherwise go to the public sector. I am sceptical that the government will be able to make big reductions in spending in NI much of which is simply because NI is a poorer region but as a taxpayer I will be grateful if it can cut out what waste occurs through duplication and unnecessary bureaucracy.
Posted by on Nov 21, 2005 @ 10:54 PMslug
I agree
The size of the Public Sector safety net chokes the private sector of talent and removes the need for more people to take the necessary risks to move the economy along.
However I noticed in the paper tonight the public sector unions are already sabre rattling
Posted by on Nov 21, 2005 @ 11:00 PM
