Brown will not cut Corporation Tax for NI

It looks like one of the few policies on which there is some degree of broad agreement in Northern Ireland is just not going to happen under a future Gordon Brown government. Corporation Tax is likely to be tied in perpetuity to the UK rate. Little chance of bringing down to the Republic’s low level then. Unless? Well, cue: George Osborne!

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  • CS Parnell

    Here’s an idea for all those unionists wanting a lower corporation tax rate. Err, cease being unionists and argue for a united Ireland.

    The thing is , if you are part of the UK you pay UK tax. Thems the breaks.

  • Mick Fealty

    CSP,

    Or wait for a Tory government: whichever comes the sooner?

  • mnob

    (cough) gibraltar (cough)

  • smcgiff

    Gibraltar is not in the UK.

    Are you proposing NI leaves the UK for the benefit of a lower tax rate? Is a Gibraltar type NI likely to get 50b of GB money?

  • Greenflag

    George Osborne – Tory Shadow Chancellor

    ‘And there’s one more thing.

    I want lower taxes.

    Because lower taxes would help Britain to compete.

    I think we’re crazy as a country to be raising our taxes when most of our competitors are cutting theirs.

    I look at Ireland and I see what lower business taxes can achieve.

    I believe that lower taxes extend the space of freedom in our society.

    I believe they help people to take greater social responsibility over their own lives, and the lives of others.

    And when it comes to spending over the economic cycle I want our economy to grow faster than our government.’

    Osborne would make a good FF/PD Finance Minister 🙂

    NI’s 6 billion a year could be in jeopardy if Osborne gets in . Now there’s a pleasant thought !

  • smcgiff

    It would be practically impossible for the UK to switch to a lower CT rate in the short/medium term.

  • Token Dissent

    I find it interesting that Republicans are arguing for a cut in corporation tax. Are these the same people who point to the inequalities produced by the Celtic Tiger?

    Is this not just another example of pushing any all-Ireland agenda at the expense of princple? Or are Sinn Fein now a neo-liberal party?

  • kensei

    “I find it interesting that Republicans are arguing for a cut in corporation tax. Are these the same people who point to the inequalities produced by the Celtic Tiger?

    Is this not just another example of pushing any all-Ireland agenda at the expense of princple? Or are Sinn Fein now a neo-liberal party? ”

    No. The SF want a small increase to the Republic’s rate and a big decrease in the North’s, because – shock – they are different rates to begin with.

    There is also the fact that only an idiot would contend the lower rates haven’t helped the Republic, and even social democratic countries like Sweden try to maintain a competitive business rate. It’s balls, and yes we are probably involved in a nasty rate the bottom but what exactly else can we do?

  • Scotsman

    Isn’t the truth that the UK would not benefit greatly from reducing Corporation Tax, since so many companies feel the need to be based here (albeit in London, not Belfast)anyway?

    Perhaps for the same reason, America has even higher rates of Corporation Tax.

    True, they have to chase the tax havens and transfer-pricing scams, but the chancellor seems to have few problems raising revenue from business regardless.

    By contrast, small countries have to cut corporation tax as an incentive to be based there.

  • Aaron McDaid (was Occasional Commentator)

    Why do people persist with the myth that cutting corporation tax would just help the well off more than (if not at the expense of) the poor? If anything, cutting corporation tax is the best way to make the tax system more progressive (hitting the well off more than the poor) – cutting it should be at the core of SF’s manifesto. Corporation tax hits all companies and industries equally, without regard to whether they supply jobs, services or goods to poor people.

    Corporation tax should be cut to 0% (which would increase salaries and cut prices) and any slack should be taken up with income tax (balancing the books again but in a fairer way). Corporation tax is a fantastic ruse to hit poor people but fool them into thinking that that they aren’t paying.

    It would be a much more honest way to tax the population and the various tax bands would actually mean something – nowadays the difference between 40% and 20% tax band is meaningless because the state takes so much money via VAT and corporation tax et cetera that there isn’t much left over to apply income tax too.

  • Token Dissent

    The Swedish rate is 28%. Danish rate is 30%. British rate is about average for the EU.

  • Greenflag

    smcgiff,

    ‘It would be practically impossible for the UK to switch to a lower CT rate in the short/medium term. ‘

    Indeed not without massive cuts in welfare payments and allowances , major public sector redundancies , reduced defence spending , education etc etc . Whether it would lead to the 3.5 million dole queues of Maggie’s reign is another story ?

  • jim

    I wonder how the 12.5% CT would have looked on the bottom line for Shorts in Belfast. Perhaps they would be investing as opposed to cutting back.

  • Crataegus

    Brown is an ass. Money goes to there is a clear opportunity to make profit, where there is the needed skills and then (or also) where the costs are lowest. I am increasingly finding better opportunity elsewhere and if I am so are others. Britain needs to reduce levels of Corporation tax but an equal problem for local business must be the additional cost of borrowing in the sterling zone.

    Brown could have given it a go in NI to see how it went. The worst that could have happened is that tax take here went down, but if it gave the local economy the boost it needed he would be the biggest winner and in such circumstances if Scotland and Wales follow suit who loses?

    Anyway not my problem.

    Greenflag

    Because you cut Corporation tax does not mean that all other taxes stay static. My own view is that we are reaching a tax ceiling in the UK and we have to consider some reductions in government spending anyway.

    We all know how Alexander dealt with the Gordian knot and I have a feeling that if he continues in his present ways Brown’s reign as Prime Minister (assuming he is) will be shorter than that of Darius.

  • Does anyone know what the corporation tax take in Northern Ireland actually is? The Azores ruling by the European Court does allow regional governments to set a differential rate if they bear the cost themselves.

    That might not be an insuperable obstacle if you believe that cutting the rate would increase the overall revenue, (not something I could venture to predict).

    I’m not convinced this is a dead issue, although I’m not surprised by Brown’s attitude. Anything that could lead to more autonomy for Scotland is a threat to his chances of becoming Prime Minister.

    He may not be able to stop it becoming an issue in the Scottish elections, however, given that the Lib Dems, who are likely to be the main power-brokers, are committed to ‘fiscal federalism.’

  • Billy

    Mick

    “Or wait for a Tory government: whichever comes the sooner?”

    The Tories have not said that they will cut Coporation Tax in NI. They may well cut it in the UK as a whole but I doubt that it will match the rate in the RoI as there is a considerable differential.

    I think CSP’s point is valid. Unionists are continually trying to perpetuate this “as British as Fichley” crap and yet they want to cherry pick the bits of UK economic policy that suit them.

    You can’t have it both ways – if you want to be part of Britain then you abide by the financial decisisons of Westminster – it’s that simple.

    Anyway, a general election is at least 2.5 years away and probably 3.5 so I think that any Unionists basing their strataegy on a Tory govt are taking a big chance.

  • Greenflag

    Crataegus,

    ‘Brown could have given it a go in NI to see how it went.’

    I don’t think so . Not in the present political climate anyway . If he ever becomes PM in his own right after the next election he might be persuaded that a lower CT regime is what’s needed to maintain the Union with Scotland ?

    ‘ My own view is that we are reaching a tax ceiling in the UK ‘

    Probably true and this could be one reason why Gordon Brown’s tenure in Downing St may be a brief one . Despite Tony Blair’s commitment to not stray too far from Maggie’s ways there has been an inexorable gradual increase in both the absolute figure for public sector spending since Labour took over and as a percentage of GDP . NI is only the visible tip of this financial iceberg .

    Reducing the tax take from business in the UK or in regions of the UK is a thought that will have the Sir Humphrey’s predicting the end of civilisation 🙂 Always easier to become an addict than give up the addiction . Sometimes what’s needed is a full blown economic crisis which threatens the solvency of the State – Ireland 1987 comes to mind . The UK as a whole is a long way from that situation even if some of the outer regions like NI have long since crossed the 50% line in public sector expenditure as a percentage of the economy.

  • IJP

    CS Parnell is basically right.

    The whole point of dropping the corporate tax rate would be not only to have an even playing field with the Republic, but also to have a competitive advantage over Great Britain. The latter is, on balance, probably more important given the sheer size of GB and the common tax/employment law.

    So if the whole UK drops, that makes little difference for NI really – no competitive advantage over the Republic, no competitive advantage over GB.

    That’s quite aside from the point that it’s not going to happen!

    If we want the Republic’s taxes, we should form a common jurisdiction – lower corporate tax and fuel tax, but also higher income tax and sales tax.

    Those are the political and economic choices in the real world, pity so few of our politicians choose to live there…

  • Smithsonian

    Lowering corporation tax was/is unlikely to happen. The biggest beneficiaries would have been the banks, followed by some pretty large utility and construction companies who are making a mint anyway. Only then do we get into helping companies that we might want to target. A balance of targetted intervention along with a drive to reduce costs is the answer.

    The only real benefit of reduced corporation tax is increased foreign direct investment seeking a tax haven but they have that already in the south, so why they would come north. What is our competitve edge?

    The thing that would really excite business and drive genuine investment is political stability and reduced costs.

    As a region without much in the way of natural energy (no oil,no gas,no sun)and limited raw materials (no uranium, aluminium, or iron) we must find other ways to reduce our cost base.

    Heres how
    Lower insurance(lower payouts), lower freight charges (buy a ferry), lower property charges (no rates, improved planning)

    Increase productivity through
    education and skills, less red tape.

    All of the above are within our grasp. Corporation tax is a red herring and as any businessman knows, nobody pays the full amount anyway.

  • CS Parnell

    As you would expect, I am a nationalist. But I am also a realist. If Ulster Unionists etc want a 12% rate of corportaion tax in Northern Ireland, they have two choice.They can abolish the NHS in the North or they can argue for a 32 county state. What they cannot expect to see happen is that the Brits will throw more and more money at their “failed political entity”.

  • Scotsman

    Anyone know if wealthy people in the Republic try to incorporate to cut their income tax bill? What stops them?

  • Crataegus

    There is always an assumption that dropping Corporation Tax is solely about attracting inward investment. It is also about retaining indigenous wealth and encouraging it to remain at home.

    Some people will go to enormous lengths to reduce tax liabilities. Settlors setting up trusts for benefactors, which are rather complicated finance companies in off shore tax havens and all that. For many it really doesn’t make sense to be over exposed to the UK tax regime and tax avoidance is a thriving industry in the South East. Perhaps with lesser rates people could spend their time more profitably on schemes that produce some constructive benefit with the added benefit that money stays in the UK and the Exchequer gains.

    Again why would someone invest in the UK when there are better prospects for growth elsewhere, in more favourable tax regimes, and where indigenous labour are well trained and cost less. Ethically I don’t particularly like the race to the bottom but this is increasingly the reality of global trade.

    CS Parnell

    The equation is not Corporation tax = Health Service, there are other places where money could be saved or money raised to finance the change. But as others have said we need to do more than concentrate on Corporation Tax there are other areas that we need to address. Our very attitude has to change, trade needs to be the priority and with that greater independence which is to the benefit of both Nationalists and Unionists.

    Anyway back to reading about Company law in the Cayman islands. As I said Brown is a fool for he had the opportunity to create a tax haven at home to the benifit of the UK balance sheet.

  • smcgiff

    ‘Anyone know if wealthy people in the Republic try to incorporate to cut their income tax bill? What stops them?’

    Double taxation – 12.5% on Corp profits & IT and PRSI on salary.

    Of course if you can keep your own personal finance requirements below where the 42% income tax kicks in you can save money. There’s also other benefits, such as pension contributions.

    People do do it.

  • mnob

    Maybe gordon should read this :

    http://news.bbc.co.uk/1/hi/business/6120492.stm

  • Crataegus

    mnob

    Excellent link which sums up the issues nicely.

  • Cormac

    Yep – excellent article.

    Surprised there was no mention of Ireland in the article, even though the sidebar lists us at position 2.