Sinn Fein for DETI…

A friend bet me yesterday that Sinn Fein would pick the Department of Enterprise, Trade and Investment when it comes to their turn to pick key ministries. It makes sense, since the party is gathering brickbats for its poor grasp of economics, DETI would be a great start for skilling up their back-room team (courtesy of the NICS). It might help them deflect caustic remarks like those made by Tiarnan O’Mahony yesterday at Leinster Society of Chartered Accountants, when he described their policies in the Republic “as economic terrorism which would nationalise industry and increase taxes, particularly corporation tax”.They should get second bite of the cherry, after the DUP who seem intent on taking finance. See Sammy’s blog for the parties’ order of choice.

  • slug

    NI’s economy is certainly moving in the right direction. Some recent inditators out this month:

    -The Ulster Bank Purchasing Managers report shows that the private sector continues to grow rapidly;

    -Today’s unemployment figures say NI has the second lowest in the UK and activity rates increased again;

    -This quarter’s migration data show migration from GB to NI to again exceed migration from NI to GB, something which has been the case now continuously since about 2002.

  • Pól

    As a SF supporter and qualified actuary (not many of them around!) with some understanding of the economy (I hope) here is my 2p.

    Let us say in an imaginary world Charlie McCreevy had reduced corporation tax to 5%. SF then introduced a policy saying if we get elected we will increase it to 12.5% as that would be more equitable. Everyone would come back saying hold on, when we reduced corporation tax to 5% the yield went up (as it did when it was reduced to 12.5%) so now SF are trying to destroy the economy by increasing it to 12.5%.

    Now I am not convinced at all that in the south companies cannot support paying a corporation tax of 17.5% instead of 12.5%. I have yet to see the proof either that 12.5% is the rate where the yield is maximised and any change would reduce the yield. The fact is 17.5% has never been tried.

    Business people obviously come out against it cause it will cost them money but it might just give us a more equitable system. Tiernan O Mahony on corporation tax = Vintners association on smoking in pubs.

    I also agree with their super 50% tax – anyone joint income over 150k should be hit with that.

    Scare tactics are working and SF needs to explain above policies and not hide from them (ala Gerry Adams on week in politics).

  • Pete Baker

    Mick

    Here’s an earlier, related, post – looking beyond the corporation tax headline – on the policies for small businesses

  • andy

    Pol
    Interesting take. I would tend to agree (I’m an economics grad but its been a few years)
    I wonder if SF feel a bit insecure on the economics question? Wonder how many economist types they have working with them (or even business types – which may be more relevant)?

    I suppose one could address the question to all socialist-type parties.
    Mixed economies are all the rage and command economies have been pretty much discredited by the practical effects of socialist economies….

  • It’s worth pointing out that the 17.5% figure actually comes from a recommendation by the ESRI. Sinn Féin didn’t just pluck it out of thin air.

  • Bit isn’t it the point that Sinn Féin have specifically not outlined their fiscal plans? Rather, they will simply look at the system ‘when’ they get into power with a view to reforming it. Aside from the fact that it sends out the signal that they currently don’t have a full grasp of how the taxation system operates within the economy, for a party whose recruitment material carries the image of Minister of Finance Guevara and who have coalesced with the former governing party of East Germany in the EU, it hardly conveys the idea that they would competently operate a modern western economy such as Ireland’s.

  • circles

    El Mat – so what exactly is your problem with Guevara’s performance as minister of finance? Indeed the fact that Cuba was able to maintain any kind of fiscal policy in the face of a massively aggressive US policy against them would then to rather speak for him I would think (if you can manage to look at the thing objectively – although Guevara does tend to make some peopel forget logic and go loopy just at the very sight of him).
    And who do you refer too when you say “the former governing party of east Germany in the EU”. The SED has been out of existence for a long time, and the PDS have merged with a left wing party that came out of the SPD (basically the German labour party). Yer not trying to play the old McCarthy “reds under the bed” are ya?

    I always have to laugh though when promoters of a neo-liberal, “open yer markets nice and wide cos we’re a comin'” type get all angsty if there is even the slightest thought of touching corporation tax, ot increasing the tax load of large earners – the thought of a bit of social redistribution certainly does get some very expensive silk panties in a twist it seems.

  • Ned

    El Mat,

    Have to say that is a bit rich coming from the SDLP – the party that broke the link between rates and water charges, that paved the way for water charges, that forced everyone else down the PFI road, that sucked in negotiations with the British Treasury and brought us the RRI (with its crap borrowing facility and ‘increased revenue streams’)

  • smcgiff

    ‘As a SF supporter and qualified actuary (not many of them around!) with some understanding of the economy (I hope) here is my 2p.’

    Actuary and economics must not have that much in common so. 🙂

    IF the Corporate tax rate had been set at 5% and the economy took off, then they would be damn right to worry if some idealist decided to hike it up to 12.5%. The key point here is that the corporation tax WAS set at 12.5% and it’s accepted that this was a significant factor in the success of the Irish economy.

    Here is where the economics comes in – High up in a multinational’s wish list is… Stability and Certainty. When a multinational performs strategic projections it can do so, in Ireland, fairly certain of the corporation tax rate. As you know CT is a key factor in strategic decision making. Increase it by 1% and all the trust we’ve built up since the mid 90s is blown away (If it’s increased this year by 1% what will it increase next year?). Hike it to 17.5%, coupled with the declining competitiveness in the Irish economy and you’ve an economic recipe that would suit Irish Ferries shareholders down to the ground.

    BTW, is there such thing as an unqualified actuary? 😉

  • Circles-

    If you look at my post, my personal views didn’t come into it- I merely said that it doesn’t convey the idea of economic competence to the southern electorate, especially since SF’s main rival on the left, Labour, have a pretty good economic track-record, whereas SF are as yet untested. Don’t take things so personally- it’s just an observation from a bystander who cannot vote in the southern elections. Whether I love or loathe Guevara is wholly irrelevant!

    Again, Ned- instead of trying to throw mud back, do you not think it may be an idea to look at what I said? Is there anything in there that is inaccurate? BTW, can you show me the Stormont minutes which prove the unfounded accusations you level at the SDLP? I think not. Aside from the fact that the SDLP’s track record is irrelevant insofar as I was discussing the southern economy.

  • Crataegus

    Taxing the ‘super rich’ at 50% will impact on the likes of the well paid Barrister and legal types people who either cannot move because their employment is specific to here or who are employees.

    The wealthier you are the easier it is to move and options like being domicile elsewhere become increasingly attractive and in the modern world it is extremely easy to move money around. You will hit the middle run but you will not hit the truly wealthy with this.

    I would like to see cooperatives and Credit Unions encouraged and perhaps we need a bit of legislation to increase their potential roles, but when they talk about the social economy please let’s end the grant gravy train. Why should a ‘community group’ be funded to build say shops that they then rent out in competition with other landlords or shop owners? Why should we have subsidised community businesses grant aided in competition with ones that are not? If this was NI PLC this would be pretty close to corporate fraud.

    In my experience it is extremely difficult to get started in business because it is difficult to raise the money you need unless you have assets to borrow against. If they want to aid business they should have a look at how this can be made easier, but instead of grants there should be commercial loans.

    Also why not have duel currencies which would mean that many could borrow in the Euro zone and save a few percent?

  • circles

    El Mat – fair enough, although I wasn’t taking anything personally, merely pointing out that neither of the two points (Guevara or East Germany) were of any real relevance relevance to the fiscal policy (or lack thereof) of SF.
    The fact that they were brought up in your post however is a clear indication that for you the mere association with non-neo-liberal figures aready puts their competence in doubt.

    smcgiff – “High up in a multinational’s wish list is… Stability and Certainty” I think you forgot subservience of the host nation, reduced workers rights, low minimum wage…… Multinationals have a lot on their wish list. The question is, is it right to grant all these wishes and allow these multinational corporations to dictate fiscal policy?

  • Pól

    Smg;

    Unqualified is what I was for many many years and it does actually exist!

    Understand your well made point about business confidence and long term planning etc and stability.

    However, are we stuck forever now with 12.5%, or can we only go one direction for fear of “undermining” business confidence? I think this is successful scare tactics by the business community. If the government of the day decided that it is in the interests of society that business had to pay 17.5% instead of the current 12.5% I think there would be alot of hyperbole and waving of arms but doubt that google, microsoft, intel et al would scurry for the boat.

  • Circles-

    My track record has clearly shown me to be anything but a neo-liberal and I would consider such a description of myself to be an insult, but for a large swathe of the southern electorate such dalliances with communist imagery and phraseology may prove an obstacle to supporting Sinn Féin, especially given the centre-right political culture in the 26 counties- as I say, among left-leaning voters, Labour may appear a safer pair of hands.

  • smcgiff

    Circles,

    ‘The question is, is it right to grant all these wishes and allow these multinational corporations to dictate fiscal policy?’

    Is it Ireland’s right to expect Multi-Nationals to remain in Ireland when they could switch to more sympathetic (read subservient if you wish) countries? Perhaps the better question is who needs who the most? Multi-Nationals Ireland or Ireland the Multi-Nationals.

    Don’t get me wrong – I’ve no love for Multi-Nationals. Working for GE and Dell in the past cured me of that, but I still think we (just not me! 🙂 ) need them.

    Pól,

    We live in uncertain times. Ireland is losing competitiveness and I think it would be foolhardy to mess around with such a successful strategy in the short to medium term. Killing the golden Goose comes to mind. Besides, there is an optimum tax rate to get the Optimum tax take. I’m not saying 12.5% is it, but are we sure 17.5% would increase overall tax take in the Medium to long term?

    Unfortunately, I’m more pessimistic (Scared? ) than you. I think we’ll see more multinationals pull out over the next few years regardless of a CT increase. I know I’m repeating myself, but we’re just not as competitive. And to bring it back to Northern Ireland and it seeking to get a 12.5% CT rate – It could very well have missed that boat.

  • Crataegus

    smcgiff

    I agree. Multinationals will slowly migrate elsewhere as production is cheaper.

    We should also remember that it is not just multinationals that can move but so also can individuals who have strong personal earnings. If you have any money at all it is exceedingly easy to relocate you prime residence and exploit the potential tax advantages.

    Unfortunately you can only effectively tax the poor and middle income groups because they tend to be trapped by debt, jobs, children’s schools and mortgages. Trying to tax those with large amounts of surplus income and wealth is like trying to catch mist.

  • El Mat –

    isn’t it the point that Sinn Féin have specifically not outlined their fiscal plans? Rather, they will simply look at the system ‘when’ they get into power with a view to reforming it.

    No, that’s not the case at all. What we’ve done is broken down the subject into three strands and have undertaken the creation of policy documents for each strand.

    Strand One, on enterprise and job creation, is completed and our policy was passed at Ard Fheis 2006.

    A policy document for Strand Two, on finance and taxation, has been completed but has not made its way through the party structures for approval.

    Strand Three, on trade, is just getting underway.

    Unfortunately we are behind schedule on Two and Three but given the year that’s been in it, I think that’s understandable.

  • Wed-

    So is 17.5% a policy? Some in the party say it is, some say it isn’t, and some say they haven’t decided how it will be implemented yet.

  • Yes, it is. That was part of the Enterprise and Job Creation policy.

    “In accordance with recent Economic and Social Research Institute (ESRI) findings that such an increase would be unlikely to result in any loss of competitiveness, Sinn Féin is proposing:

    • A 5% increase in corporation tax in the 26 Counties from the current 12.5% to 17.5%.

    • The gradual harmonisation of corporation tax on an all-Ireland basis. In the immediate term, a corporation tax rate in the 6 Counties of 17.5% for smaller companies with profits from €50,001 to €300,000 while maintaining the rate of 30% for larger companies with profits of over €300,000.”

  • URQUHART

    Thanks Wednesday for the clarification. Now can someone tell those involved in the campaign for 12.5% tax rate in the North?

    They seem to be labouring under the misunderstanding that all the parties are agreed on the need for the lower tax rate.

    It’s just we don’t want any misunderstanding as they all begin negotiations with the treasury.

  • Crataegus

    We negotiate to set our Corporation rate 5% higher than the South in the hope that SF will be in government to raise the rate there. Therefore even if we do achieve the 17.5% there will be a 5% differential for the foreseeable future. That is really clever.

  • Comrade Stalin

    Pol (and others wrote similarly):

    Now I am not convinced at all that in the south companies cannot support paying a corporation tax of 17.5% instead of 12.5%. I have yet to see the proof either that 12.5% is the rate where the yield is maximised and any change would reduce the yield. The fact is 17.5% has never been tried.

    The Irish economy is not in a vacuum where corporation tax alone determines the level of private sector economic activity. Ireland has many problems which threaten to reduce it’s economic competitiveness in the future. Keeping corporation tax helps to offset those problems. Increasing it even by a small amount may well tip the balance.

    I agree with having a 50% super-rich tax. I’d like to see the limits for the lower tax rates raised so that people working on low wages pay little or no net tax.

  • J Kelly

    el mat do you not have more pressing matters to be getting on with like deciding who will be the next leader of the minor political party which you support. btw I have to say i feel really sorry for sharon haughey after the build up you gave her

  • We negotiate to set our Corporation rate 5% higher than the South in the hope that SF will be in government to raise the rate there. Therefore even if we do achieve the 17.5% there will be a 5% differential for the foreseeable future. That is really clever.

    SF would be better off applying the reverse logic of aiming for harmonisation now at 12.5 per cent and making 17.5 per cent the long term goal.

    Under current EU rules, having a differential tax rate from the UK is only legal if the the North takes a significant degree of economic control from Westminster.

    There seems to be an emerging consensus behind that proposition which includes the Irish Government, the SDLP, the UUP, the DUP and much of the business community in the North.

    On the other side is the British Government, which is worried about the treasury’s tax take and the cohesion of the UK.

    Surely, SF needs to be seen to be firmly in the former camp, and not potentially letting the British Government off the hook?

  • Wed-

    But on another forum, Sinn Féin’s South Tipp Dáil candidate Liam Browne said earlier this month: It is not SF policy to increase Corporation Tax to 17.5% [emphasis in original quote]

    You will not find a SF economic document stating that anywhere.

    SF taxation policy has stated that if they are in Government they will carry out an audit of the whole tax code with a view to reform within the system.

    We have stated that we have a belief that the rate of Corporation Tax COULD be raised to 17.5% without having any negative adverse effect on the overall level of tax take from the sector, BUT it is not SF policy to simply raise the level of tax to 17.5%, just for the sake of it.”

  • I saw that, El Mat. He’s wrong and it was pointed out to him later in that thread.

    As to why he was under that impression … your guess is as good as mine.

  • Thanks for clearing that up.