Friday, March 30, 2007
“no prospect at all of a differential corporation tax in Northern Ireland”
There may have been an announcement of a review of the different tax rates between Northern Ireland and the Republic of Ireland, to be conducted by Sir David Varney a former chairman of HM Revenue and Customs - it was one element of that total package announced by Gordon Brown - but as the Belfast Telegraph’s Mark Hookhan reports, according to the Secretary of State for Wales, etc, corporation tax will not be affected.
Speaking yesterday in Westminster, Mr Hain said: “The problem here is, as the Chancellor and I have explained to the parties, European Union law makes it impossible to have differential corporation tax within any part of a nation state. So, there is no prospect at all of a differential corporation tax in Northern Ireland.”
Pete Baker @ 10:51 AM
And nor there should be.
This place is not a special case anymore. If people spent less time whingeing about their disadvanatages and started actually building they might gets somewhere. Otherwise they shouldnt be in business.
There are plenty of examples of companies who have done well under the current fiscal and regulatory regime. Maybe we just have too many losers aroudn the place.
Posted by on Mar 30, 2007 @ 11:07 AMThat the item was floated in the first place (by what passes for politicans in N Ireland) shows the depths to which we have sunk.
The one bright spot on the horizon is that these intellectual cripples may now actually have to govern within the funds available. Watch this space
Posted by on Mar 30, 2007 @ 11:35 AMWhat he is saying as I read it is that under EU law corporation tax would have to fall to 12.5% in a united Ireland
Posted by on Mar 30, 2007 @ 11:39 AMSo lets see...thats Corporation tax out,water rates posponed for a year now instead of being scrapped and the block grant the Stormont Stormtroopers were begging for is nowhere near what was being originally talked up.
Boy..these guys negoiating skills are second to none.The British Goverment must be laughing up thier sleeves!!!Posted by on Mar 30, 2007 @ 11:43 AMHenry
Yeah ok, thanks for the laugh.
Posted by on Mar 30, 2007 @ 12:03 PMI am not entirely convinced by the EU law argument. If I recollect correctly the EU law restraints were considered in a judgment of the European Court of Justice relating to the Azores, where the local government had reduced the corporation tax rate.
The rationale of the ECJ decision was that if differentials in corporation tax were as a result of decisions by local bodies then they might be permissible, if they were (as in the Azores) as a result of agreements between local and central government they would not be.
If NI had tax raising autonomy it might be possible to introduce differential tax rates under European law.
Posted by on Mar 30, 2007 @ 12:03 PMSuorise suprise, the British government has finally admitted that they have no plans to lower corporation tax.
The whole Varney review was clearly just a calculated political move by the British Government designed to win over political parties, it is clearly implied in what Hain is saying that the NI parties where looking for a slash in corporation tax (an unrealistic demand that the British Government would most likely never carry out). The Varney review merely exists so that British Government can be seen to be listening to demands of NI parties.
What is depressing is that the political organisation in Northern Ireland know so little about the economic elements of politics they thought this was a real possibility. They probably just got the idea after reading an article explaining what corporation tax is in the Irish times…
Posted by on Mar 30, 2007 @ 12:11 PMIf Scotland left the union, followed by Wales, followed by Cornwall, followed by the North of England then maybe NI would get a favourable CT rate to the rest of the union.
Posted by on Mar 30, 2007 @ 12:20 PMAldamir,
“If NI had tax raising autonomy it might be possible to introduce differential tax rates under European law.”Either way, if it didn’t get the tax in from the move then it couldn’t get a bale out from Westminster and would have to live with the consequences if there was a deficit. It’s a double-edged sword.
Fiscal autonomy also means fiscal responsibility.
Posted by on Mar 30, 2007 @ 12:25 PMAldamir,
Even if NI had more tax altering autonomy there would be no garuntee that the corporation tax could be altered.
Just look at the mess Gibraltar has got in with the EC over their plans to lower corporation tax. Although they are recognised as fiscally autonomous from the Uk by their constitution, the EC ruled that this was irrelevant and that they were part of the UK’s economic sphere and lowering the corporation tax still violated competition laws…
And Gibraltar has an entirely seperate tax system…
Posted by on Mar 30, 2007 @ 12:55 PMWhat happened to UTV’s recent exclusive that fuel duties were going to be equalised (ie. reduced) to those of the Republic? Not speculative guff, surely?
(Though this wouldn’t be against EU rules - I’m 99% sure it happens in some other EU countries in zones near to land borders.)
Posted by on Mar 30, 2007 @ 01:26 PMHain is simply wrong on this. The Azores ruling blocked the particular regime proposed in that case, but it backed the principle of regional tax differentation if certain tests are met.
The court has upheld the three tests postulated by the advocate
general in order to evaluate whether a regional tax regime is truly
autonomous: institutional, procedural and economic autonomy. This means
that the regional tax regime must be approved by a public body with a
considerable degree of autonomy and without the interference of the
central government in the approval process and that its financial
impact must be borne by the autonomous government, without compensation
from the state authorities.In short, the region must both have the power to adopt the specific regional tax measures and bear their cost. (International Tax Review)
The first test will be met once Stormont is up and running. The second test could be met if Westminster devolved powers over taxation. Even the third test is not an insurmountable problem, if you think that a corporation tax reduction will eventually pay for itself. Last year’s ERINI study concluded that the overall effect on public finances would be positive by 2013.
Posted by on Mar 30, 2007 @ 02:04 PMExcellent. Not even an assembly established and already the pros and cons of tax raising powers being raised. If people want “real politics” then they’re going to have to face “real responsibilities” and to me that means not depending on the British Government to decide what size of a cake we get to divy up.
The power to raise or lower taxation rates is the very essence of politics. The sooner these powers are devolved onto the island of Ireland the sooner everyone will realise the benefits of working on an all ireland basis. 2016 anyone?
Posted by on Mar 30, 2007 @ 02:22 PMTerry,
The ability to lower and raise tax rates still does not nessecarily solve the issue with corporation tax. Scotland can lower and raise specific taxs (mainly business rates and income tax) but is powerless to alter its corporation tax rate.
Gibraltar however demonstrates a more worrying example. They have complete tax autonomy and have the capability to lower and raise their taxation as they see fit, overseen by a legitimate local body. However the EC has still ruled their plans to cut corporate tax as being against competition ruling due to the unfavourable advantage it would give them above other areas of the UK.
It is true that Gibraltar is fighting this tooth and nail and going to the highest EU courts about the ruling but it is a word of warning to NI, an area of the UK that enjoys les political and fiscal autonomy than Gibraltar (the devolved nature of the government offering less independance than the overseas territory status of Gibraltar).
This is a relatively moot point anyway as the Uk government will not pass legislation giving Scotland or NI this degree of fiscal control as it moves devolution a step forward, feeding the SNP’s economic demands as well as further weakening the British Parliament’s control of the UK
Posted by on Mar 30, 2007 @ 02:58 PMprotorious,
Its my view that the longer the real powers are held, and the real decisions regarding our taxation and ultimately the size of our economic cake, are made in London in the interests of London, the more people will wonder why. Hopefully they will then make what i consider to be the small step in deciding we are likely to be better off having a bigger say in our own fate, and turn towards the south.Posted by on Mar 30, 2007 @ 03:13 PMThe European Commission might have challenged Gibraltar, but it doesn’t mean they’ll win in the European Court. On the basis of the Azores ruling, Gibraltar has a strong case.
No doubt, the British Government doesn’t want a Corporation Tax cut for Northern Ireland. That is the real significance of Hain’s remarks.
It may not be that easy to close down the debate though. It’s quite possible that a Scottish coalition could be be elected with a mandate to demand fiscal powers. Equally, Scottish business leaders are saying they expect pressure from England for changes to the Barnett Formula that shares out public spending across the UK.
There’s a saying that devolution is a process not an event. After May, we could well be in the next phase of the process, with fiscal powers at the top of the agenda.
John Major set his face against the emerging consensus for devolution, but ultimately failed to stop it. Gordon Brown may find himself in a similar position in relation to fiscal devolution.
Posted by on Mar 30, 2007 @ 03:55 PMTerry Doherty,
‘The sooner these powers are devolved onto the island of Ireland the sooner everyone will realise the benefits of working on an all ireland basis. 2016 anyone’
It’s a moot point now whether lowering the CT Rate in NI would even make a significant difference to NI at this stage. 1984 would have been good timing -by 1998 it was already late. Now it’s not only late but the investment boat has long since left the dock and won’t be coming back this way anytime soon . As for 2016 ? The only difference in NI by then will be how much of the remaining NI private sector will have been bought out by ROI other non NI investors .
The UUP/DUP have played a ‘blinder’ in the whole economic policy area 1969 to the present . But not in the traditional meaning of the term :( They could’nt see beyond the internal conflict within unionism or beyond the sectarian stand off in NI. Now NI gets to pay the price for 40 years of ostrichism from Unionist politicians ‘.
Anyway the DUP/SF will assuredly carve up between them whatever spoils they can .
Posted by on Mar 30, 2007 @ 04:34 PMHain is simply wrong on this.
You guys are missing the point. Why should we get a tax discount compared to other poor areas of the UK ? Hain’s electorate, like Gordon Brown’s electorate, will not allow him to do this.
Posted by on Mar 30, 2007 @ 07:12 PMComrade Stalin,
Hain is simply wrong in his interpretation of the Azores Ruling, which does allow for differential tax rates in autonomous regions.
That ruling is potentially relevant to Hain’s electorate in Wales and Brown’s electorate in Scotland just as much as to Northern Ireland.
Brown’s electorate in particular, is waking up to this fact. Both the SNP and the Scottish Liberal Democrats are in favour of some form of fiscal autonomy. They could well emerge from the May elections in a position to apply some Catalan-style leverage to achieve it.
The danger if anything, is that Northern Ireland could get left behind.
Posted by on Mar 30, 2007 @ 07:34 PMSo historically the most autonomous region may have the least autonomy when it comes to competing with the others. This sounds a bit, well, colonial.
When we don’t get different corporation tax we should then strengthen our transport and business links to provide services into the faster growing ROI economy.
Has anyone told Ian Paisley?
Posted by on Mar 30, 2007 @ 07:52 PMGibraltar has a good case. Paying for the decisions you make is the core of the Azures case. Mapping it across to NI is simple only in principle. It would not require modification of the Barnett formula - it would need ditched.
Put plainly, NI is not ready for that - it would make the cost of water seem a trifle. Politically, it raises interesting questions - but economically - we’re not about to vote for hardship. If I was English I’d be very keen to award NI the responsibility of paying for itself. It’s certainly possible but Wilson got the problem well described many years ago. NI has only become more dependent since.
Perhaps the word parasite is too charged. But - no NI politician is getting elected on a mandate of closing hospitals, closing schools and cutting back social welfare.
If the cap fits folks .. There was a time that British identity in Ireland was industrious. That identity is long gone. It’s the Irish identity that is prospering. Some unionists used to base their identity on economic reasons. It is these that unionism need worry about. They may bring about surprising political change.
Are all Irish Brits happy with enforced dependency?
Posted by on Mar 30, 2007 @ 08:33 PMThe danger if anything, is that Northern Ireland could get left behind.
Tom,
Be realistic. This is nothing to do with whether it’s legal or not. Are the Brits going to cut corporation tax here so that HBOS, HSBC, Barclays and all those huge companies in the City of London all move over to Belfast to take advantage of the cut ? Are they going to gut London for the peace process ? I can assure you that they won’t.
Posted by on Mar 30, 2007 @ 10:23 PMI hope the uncertainty can be put to bed and this one club golfer mentality to economic policy can be kicked into touch and our Assembly can start thinking of ways to support and grow our indigenous Entrepreunerial Private Sector.
Nobody wanted to pay higher tax and/or pour cold water on the party but the only real champions of all this were people like George Quigly and the local Business Press.
George Quigly is possibly thinking of Shorts and the Belfast Telegraph and Co would all love an extra 17.5% retained profits in NI to invest in technology here.
We are all going to have to work a bit harder and think of better ways if we want UK Services along with UK Income Tax, VAT and Stamp Duty Rates.
This was always a case of wanting our cake along with the best slices of our neighbours to eat.
Posted by on Mar 30, 2007 @ 10:37 PMThe real frustration with this argument, other than the fact that Comrade is entirely right to say it isn’t going to happen, is the assumption that it’s a magic solution to all our economic problems.
Actually its effect would be minimal. I don’t even think the big banks would shift here.
Very few investors choose a location for tax reasons - frankly, you get caught somehow everywhere. They want stable politics, a well and aptly educated workforce, and a high quality of life for the Executives who are going to spend time here.
Does NI offer these? Even any of these?
Is anyone going to take on the real basic problem?
Posted by on Mar 30, 2007 @ 11:06 PMI am amazed at the nonsense about this one.
You want Republic of Ireland corporation Tax that is easy, vote Sinn Feinn, hold a referendum and vote to join the republic, easy.
Second option devolve tax and finnace so that revenue from Northern Ireland provides all services in Northern Ireland you can then choose to raise or lower taxes, lower corporation Tax means higher income Tax or closed schools and hospitals, I am sure Gerry and Ian can agree how to fund it. To those that argue that lower rates mean more investment and more profits so overall more Tax, that may or may not be true but the change does not happen within the first 12 months it takes time for the higher investment to feed through so in year one you are faced with spending cuts or higher other taxes.
But I forgot this is Northern Ireland and there is an assumed third option. Allow us to reduce corporation Tax to attract companies and jobs from Scotland, England and Wales. AND get the taxpayers of the South of England to pay us even more for the services regardless of the fact we are paying less tax than they are.
CLOUD CUCKOO LAND!!
The voters of Scotland, Wales, the North East, etc etc all Labour Heartland would go nuts as they would argue they are deprived and entitled to “special treatment” too.
The voters of London and the South East would go nuts as they are already complaining that the Barnett formula needs to be rewritten to keep more money in the area which produces it i.e. within 100 miles of London, and sends less to Northern Ireland, Scotland and Wales.
The fact that it may or may not be legal depending on the interpretation of an ECJ case about the Azores is not the point. The point is from the perspective of voters on the other side of the water why is it a good idea for them.
The idea of special treatment even on Petrol Tax, or drink duties are also unlikly, if Northern Ireland gets it why not the ferry ports of Kent?
How long is a journey from Belfast to Dublin, as of November London to France will be will be around an hour on the high speed channel tunnel link.Posted by on Mar 31, 2007 @ 04:32 PM
