TUC and ICTU oppose lower Corporation Tax for Northern Ireland

Interesting to note ICTU Deputy General Secretary Peter Bunting, now sitting on that interim NI Water Board, welcoming a TUC report critical of attempts to lower corporation tax here.  From the Belfast Telegraph report

ICTU Deputy General Secretary Peter Bunting said: “This paper should once and for all lay to rest the argument by some vested interests in Northern Ireland that a low corporation tax regime would assist economic growth for all, as opposed to private profit for the few.”

As far as I’m aware, all the political parties within the NI Executive are in favour of reducing corporation tax here

According to the Belfast Telegraph report

A TUC report says that reducing corporation tax to 12.5% would only encourage ‘brass plate’ investment — where companies register their names somewhere for tax purposes without moving staff — so it would fail to generate additional tax revenues or jobs.

Differing tax rates between Northern Ireland and the rest of the UK would be an open goal for tax avoidance, the report says.

Update  In the comments zone John O’Farrell provides a link to the actual report [pdf file].  And, as he correctly points out, it is a report jointly commissioned by the TUC and the ICTU.

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  • Frusatrated Democrat

    Of all the statements from the trade unions this is the biggest load of rubbish I have ever heard. They are on the old agenda of bad companies exploit workers and don’t pay any taxes.

    The truth is that new companies coming here would employ workers and they would spend money in the economy employing workers in smaller companies and so on. Local companies would have more money to invest in expansion and also create new jobs. Southern Ireland won’t give up their low tax rate, despite threats form the EU, as they know what it contributes to economic growth in their depressed state

    There is no justification for complaining about brass plating, there are already enough safeguards in tax law to cover companies trying to do this. Even if some did slip through the net they would still contribute taxes to Northern Ireland.

    The old rhetoric from the unions never changes, Owen Paterson must push ahead with allowing Stormont to set tax rates and his Enterprise Zone ideas for NI if we are ever to see a move towards to an economy that can stand on its own.

  • JH

    That’s a shame, the unions should be leading the charge for devolution of Corporation Tax. The imbalance on this island encourages any indigenous, knowledge-based start-ups in the north to immediately question their location as soon as they become profitable.

    Of course there is no way we’ll see a Corporation Tax adjustment here whilst we remain part of the UK. Look at the Azores Ruling and the additional hit the block grant would take on top of the cuts that are coming, we’re talking an extra £300m a year.

  • Itwas SammyMcNally whatdoneit

    Such statments from the Unions must surely encourage the Tories. (This should have been delivered from day 1 with Stormo anyway if Trimble and Hume had got their act together).

    Hopefully this is an issue that the big 4 parties can agree on but with Tommo the Orangeman looking for somewhere to kick up some dust he may try to play the old UUP chestnut – in agreement in principle but not at the moment line.

    Jimbo has declared his hand already of course.

    http://www.tuv.org.uk/press-releases/view/757/sinn-fein's-economic-policy-both-inane-and-insane

  • Joseph Addison

    This is total half baked Ultra Left Them and Us Brothers Tripe. Its alright lads “We dont want any bloody new jobs”. We’re living in a Socialist Utopia here lads all employed by the other 30% Lads. What a prize bunch of suckers they are. Get your sponges out and wear them with pride.
    This morning I awoke to Rodney Bickerstaff castigating Philip Green as a Monaco resident. Does not this pygmy sized brained pin head ever consider the weekly VAT, PAYE, Nhi contributions that come from this source. Its a fact of life that Unions only exist in the Public Sector.
    Harold MacMillan told the Nation “Get off your Asses,Pick up your shovels, get on your Camels and we will go to the promised land. Harold Wilson then told them “Sit down on your Asses, put down your shovels and get out your Camels We have now reached the promised land”. Some people never learn.

  • Itwas SammyMcNally whatdoneit
  • Comrade Stalin

    Yup.

    And even then there are plenty of easy ways to fix the problem. Such as not granting the corporation tax discount to companies with fewer than X locally deployed staff.

  • DC

    Not sure why McGuinness of all people is concerned about cuts, another 10 billion or so of them and he’d have his united Ireland.

  • aquifer

    A switch to a more private sector economy would lessen their relative power here at least, as there are fewer union members in the private sector. The British TUC were never going to let jobs move to this island.

    This could be a one-off opportunity. It will cost the NI government less to launch a cut in corporation tax in a recession, and companies can grow faster coming out of it.

    We can employ a few more tax inspectors to prosecute companies that just pretend to trade here. There are hundreds of spare civil servants here to do the work.

  • SDLP Man

    Sammy McNally

    Just lay off sniping at SDLP and UUP for what they allegedly didn’t do during the Good Friday Agreement in 1998, will you? The fact is that all local parties at the table then were co-equal while SDLP and UUP did the heavy lifting on nearly all issues. Sinn Fein only intervened substantiatively on the issue of getting their prisoners out, it’s all they were interested in.

    Indeed, I heard from someone who was there that in Strand Two (North-South) the final submission to George Mitchell was the SDLP position paper with the Sinn Fein logo pasted over it.

    As (I think) Malachi O’Doherty once characterised it, the SDLP are the swots who worked hard and got the 11+ while Sinn Fein are the more street-wise kids who failed the 11+, can’t be bothered doing the home work and would rather copy it instead.

    It shows in the NI Executive: when it comes to policy DUP are running rings around them, as Denis Bradley has already pointed out.

    All that said, I am sceptical of the ability of a low rate Coproration Tax to transform the NI economy and JH’s comment is the most informed one..

  • barnshee

    Repeats

    “A TUC report says that reducing corporation tax to 12.5% would only encourage ‘brass plate’ investment — where companies register their names somewhere for tax purposes without moving staff — so it would fail to generate additional tax revenues or jobs.”

  • Progressive Unionist

    The TUC have a point – it should be made clear how much of the cost of reducing Corporation Tax will fall directly on the heads of Northern Ireland residents?

    How much of the cost of reducing Corp Tax will be taken directly out of the block grant?

    If Corp Tax is reduced willy-nilly without thinking through the consequences then we run the serious risk that companies will just set up in NI in order to vacuum up money directly from Northern Ireland’s block grant, straight into their private profit column – without necessarily boosting employment or the economy.

  • Progressive Unionist

    Well there certainly need to be very strong regulations around who is granted any Corpo Tax discount, and it needs to be clear that the only companies which should qualify are those which employ many local people and which are seriously invested in Northern Ireland’s future.

    Otherwise Northern Ireland will just be handing over Corporations money directly from their block grant for little or no return, when this money is desperately needed for schools and hospitals.

    I can see the argument for special economic zones, or a Corporation Tax discount for model companies seriously committed here – but am very very wary of this all-party rush to wholesale Corporation tax reduction.

  • Progressive Unionist

    (NI 2010 is not the Irish Republic 1990 – Corp Tax is not the magic bullet, not in this economic climate.)

    Remember – a corporation tax discount means money taken directly from Northern Ireland’s hospitals and schools and given to corporations.

    There needs to be a bloody good reason to do that, imho.

  • Itwas SammyMcNally whatdoneit

    SDLP Man
    I’m still not sure why the SDLP and the UUP, as the largest parties, didnt push for this in the GFA. Any ideas?
    I presume SF were then ideologically opposed to the idea of reduction- perhaps the SDLP as well?

    “It shows in the NI Executive: when it comes to policy DUP are running rings around them, as Denis Bradley has already pointed out.”

    Are you talking about the way SF in unison with the 2 governments painstakingly pushed the DUP over the finishing line on Police and Justice whilst the SDLP and the UUP jibber-jabbered negatively from the sidelines or perhaps you are referring to the fact that the DUP have got themselves in a total muddle with their ‘clever device’ which they negotiated with SF on the parades bill to soothe their supporters over the transfer or perhaps you are refrring to the fact that they conceded the principle of largest party gets to have First Minister?

    SF must indeed be really shaking in their boots if there is to be any further such negotiating by the DUP.

    …and hopefully your negative views regarding Corpo tax are not shared by your party.

  • DC

    Progressive ‘Trade’ Unionist?

  • Progressive Unionist

    Not a member of any Union but I think Unions are needed and they do a very valuable job in protecting low-and-middle income working familes in Northern Ireland and around the world.

    Would you care to address my core point – a reduction in Corpo Tax will take money directly from Northern Ireland’s Hospitals and Schools and will transfer it directly to the profit sheets of bankers and big corporations.

    If there’s a very, very, very good case for that in terms of increased employment and prosperity, and if there are very, very strong regulations to prevent ‘brass-plating’ companies setting up in Belfast just to exploit this law, then I’m willing to consider it.

    But given that this is taking money from those who needs it most – from our hospitals and schools – and handing it to multinational corporations – where’s the strong case for that?

    PS Sammy McNally – do all your Sinn Fein colleagues think the way you do? I thought you guys were a socialist party? Any reservations at all about this proposed financial transfer from the needs of working families to the wallet of multi-national corporations?

  • fin

    Of course having a minimum number of local employees to qualify then gives those local employees an unfair advantage over employees located at the same company’s offices\branches\factories elsewhere in the UK or world should the company streamline or make redundancies.

    Alternatively a company could just stick a minimum wage Call Centre in NI to make sure it qualifies.

    I can understand SF wanting Corp Tax to match Ireland’s for political reasons but there’s no excuse for other parties to want it. There are EU countries that share land borders with countries that are tax havens and they seem to survive. This is just a silly clutching at straws as there has been a load of cash thrown at NI to encourage economic growth and all have failed.

    The facts are the same for Scotland and Wales, in the UK England is the daddy on all fronts, political and economic, if you’re in the union it’s a case of keeping the begging bowl rattling in Englands direction

  • Reader

    Progressive Unionist: If Corp Tax is reduced willy-nilly without thinking through the consequences then we run the serious risk that companies will just set up in NI in order to vacuum up money directly from Northern Ireland’s block grant, straight into their private profit column – without necessarily boosting employment or the economy.
    Look, any company that sets up here to pay a lower rate of Corporation tax than they would in – say – Belgium is a net benefit. It’s extra tax. Brass Plates are Good, though the EU won’t share that view.
    All the better if the new businesses create a few new jobs.
    And if a reduction in corporation tax allows existing local business to grow, that is compensatory extra tax and extra employment.
    The downside is that existing local businesses will pay less tax as a side effect.
    The gamble is that the three positive effects will outweigh the one negative effect. The unions should join a sensible debate over *that*. Their contribution so far has been pathetic, and the ICTU is looking like the dog in the manger – and a partitionist dog too.

  • Granni Trixie

    SDLP Man: your self believe is delusional – it beggars belief!.

  • John East Belfast

    I am with the Unions on this.

    The whole equalisation of CT debate was all about ROI Corporates during the Celtic Tiger wanting one rate of tax on the island – both for their existing northern operations as well as wanting to establish new ones to avail of lower rents, salary costs and living expenses.
    The Titanic Quarter development was there to bring Dublin Financial Services jobs to Belfast fro Dublin.

    Of course one of the reasons that other taxes and living expenses are lower is that the UK has a broader tax base and believe that corporates should pay their fair share – hence ROI corporates wanted their cake to eat in NI at the UK tax payer’s expense.

    If you read the corporate letter posted on Slugger here a few years back you will see that the greatest number of signatories were ROI corporates with Northen operations. It was no coincidence that the Belfast Telegraph led the charge on behalf of Tony O’Reilly.

    Basically existing profits being earned in NI were being remitted back across the border with 30% UK Corporate tax deducted and that really stuck in their throats.

    There is no doubt there are many other existing corporates in NI – have a look at the “Business Eye – Top 200” profitable comapnies – who the CT rate makes no difference. That lower tax take would have to be made up before any extra jobs were created from the companies that would come here. Of course most of those latter companies would be from the UK wanting to avail of UK residency and legal standing but of a special UK CT Rate. However that would simply displace the UK tax base. Meanwhile many within NI’s privately owned CT paying corporates (and I am one) would simply have more BMWs etc in the drveway as they have extra post tax profit to take for themselves.

    However nobody wants to pay high tax and lets not forget the Tories have committed to an eventual 24% Rate. In addition there are substantial tax credits available form Research and Development Expenditure that can reduce that significantly further.

    However there are things that can be done with NI’s Tax Rates that can respect its unique geography within the UK within any Enterprize Zone.

    1. Reduce VAT to as low as possible for Clothes, dining out, hospitality industry (hotels and conferences) and fuel. This will further reduce the cost of living in NI as well as increase its competitiveness as a city break destination etc.
    This will not affect the rest of GB as nobody is going to take the ferry over to fill their car up.

    2. The soon to be 13.8% NIC on jobs should be reduced to 10% or lower to encourage NI as a low cost to employ people. In my view that is a greater incentive to put a factory and employ a lot of people than a lower CT Rate.

    3. I would do some clever things with how seed capital is taxed on exit in NI making it an attractive location for Private Equity and Venture Capital investment.

    4. How would the above be paid for ? – I would abolish Invest NI for anything other than an information shop for FDI.

  • bob wilson

    JEB – With regard to your point 3 The Tories have already done alot on this. They have not introduction Labour’s propsoed increases in NICs and given a NIC holiday to the first 10 jobs a company creates outside London and the SE of England – this could be worth up to £50,000 a year for 3 years to a new investor
    Given the financial situation this is probably as good as it gets on that particular.

    Oh and for those who think Tories only look after ‘their own’
    The fact that the NIC holiday does not apply to their electoral heartland, the cut in Child benefit and the increase in tuition fees somewhat gives the lie to that fatuous line of argument

  • John East Belfast

    Bob

    I know but if we are going to make NI an Enterprise Zone and do something special with Tax the above is what I would do rather than cause UK wide problems with CT

  • sammymehaffey

    Surely there are far too many hospitals and schools for the size of the population. Ending segregation in schools would save a fortune and pay for the block grant.

  • Glencoppagagh

    When the RoI was forced by the EU to have a single rate of corporation tax, it meant that the cute hoors like property developers could avail of it and it failed to generate genuine indigenous enterprise, leaving the economy dependent on multinational exporters.
    The same kind of people as well as retailers and banks would benefit from a lower rate in NI.

  • SDLP Man

    Grannie Trixie

    Why exactly is my ‘self believe’ (sic) delusional? What is the point relating to my post that you wish to make? Will you kindly make it, please? Until you do so, your opinion is irrelevant, and your grammar and syntax remains dodgy.

    I’m an SDLP partisan, you’re an Alliance one. You come up with stuff in a recent post like ‘John Hume was just ok’. I could say in reply-“do you mean in comparison to, say, Ollie Napier or John Cushnahan?” For me your comment says a lot about your narrow, even mean-spirited, views.

  • Good debate so far, so as to inspire more, here is the full report:
    http://www.ictuni.org/uploads/67b098da-831b-4ef7-ba01-f5111705d2bc/CorpoTaxlores.pdf

    Pete is slightly amiss in his intro. This is a joint ICTU/TUC report, authored by Richard Murphy of here: http://www.taxresearch.org.uk/Blog/2010/10/13/northern-ireland-no-pot-of-gold-at-the-end-of-the-125-rainbow/

    Happy reading…

  • Frusatrated Democrat

    If you want facts and figures go to http://www.ergni.org , there is no point in some people here talking about subject where they have no idea of the complexities involved and solutions available.

    It is, as far as I know, not a possibility to levy different rates of corporation tax based on industry so it would be one rate for all.

  • Pete Baker

    Thanks John.

    I’ve added a corrective, and a link to the jointly commissioned report, to the original post.

    No wonder I couldn’t find it yesterday…

  • Thanks, Pete. It was officially embargoed until this morning, ergo no online presence until today.

  • Granni Trixie

    Believe it or not saying “JH is OK” was intended positively as I respect his contribution and I did not go on to make criticisms as i might have,did I?. I was also trying to express a reaction to the inflated claims you make about him and about the SDLP (“heavy lifting” etc. I could just have easily said that my hero Bob Cooper, lead the way in Fair employment law/practice,quite a contribution).

    I would argue that we are in different parties because we hold different analyses of the problems in NI and are driven by different goals. I think that cultural as well as structural
    change was needed to advance the peace process. Many
    contributed to this, not least the peace movement/community relations groups as well as many political parties.

    BTW, I am confident enough in myself not to be affected at all by your criticism of “dodgy syntax and grammar” (if only that were all that could be levelled against me!). Significantly, I never criticise people’s lack of writing skill on Slugger incase my cheap remarks puts them off.
    Another value difference between us.

  • Frusatrated Democrat

    JEB

    Corporation tax is paid on company profits; once the profit is removed from the company it would attract a vastly different rate of tax.

    E.g. 40 or even 50% on a salary or 40% on dividends so the point of low CT is to encourage firms to retain profits and reinvest.

  • John East Belfast

    FD

    Thast is not true
    For lower rate tax payers – eg if your wife holds the shares with minimum income there will be no additional income tax to pay.
    For Higher Rate you would pay 25% on the Net Dividend and for the Higher Higher Rate you would pay 32.5% on the Net Dividend.

    Either way if a lower amount goes to the Govt in CT then there is more left over for the SHareholders.
    They may leave it in there to pay down debt or add to the cash pile and if ultimately they have a company sale in mind they will be looking to have it taxed as capital gain at 10% or 18%.

    However surplus post tax profits will only be invested in the company if the shareholders believe that such investment will lead to even higher profits – if that is far from guaranteed the shareholders would rather pocket the money and invest it elsewhere.

    I think the unions know the corporate mind set well.

    A lower CT rate in NI is not a guarantor of economic stimulus – what flows in the front door will take years to subsidize what has gone out the back door.

    However there are other clever things we can do with tax

  • slug

    Tesco is one of our biggest employers.

  • SDLP Man

    Grannie Trixi

    I respect the Alliance Party primarily because, like the SDLP, it was one of the two political parties here which never associated itself with violence. I also honour people like the late Bob Cooper (whom I knew quite well) and Oliver Napier. They, and many like them in the AP, are good, decent, honourable people.

    My original point was that you came into the thread gratuitously with a snide one liner that my self-belief was delusional and I didn’t have a clue what you were referring about, whether about the Good Friday Agreement or Corporation Tax. Now that I know it’s about the former, I think it is pretty well established by the historians that the template for the GFA was from the SDLP (three strands etc.) and primary negotiating role from the local parties was carried out by SDLP and UUP. Even Paisley acknowledged that.

    I’ve never said that everything the SDLP did and does was and is right. In many places it’s an organisational mess. But Alliance needs to be a bit humble about things it did in the past too. In the seventies and eighties they were constantly attacking SDLP for ‘not supporting the RUC’ although we did, in the lawful execution of their duty. This week, papers turned up by the Pat Finucane Centre and published in the Irish News show that the RUC of the time did not even recognise the concept of the protestant/loyalist terrorist, so there was no question of interning them. I take that as a small vindication of the SDLP stance at the time.

    Others on this thread attack me for being “negative” about Corporation Tax. Read what I said:

    “I am sceptical of the ability of a low rate Corporation Tax to transform the NI economy”.

    I do know a wee bit about fiscal policy and the comments of informed others on this thread tend to support my view.

  • Granni Trixie

    Clearly we are never going to agree in our versions anjd interpretations of events. Being out of kilter with “authorities” such as Paisley or “historians” worries me not one bit.

    I do take issue over what you say about Alliance and policing. Alliance believes in the rule of law and order which is not the same as hending the police a blank cheque. We recognised policing and accountability was an element of the problem to be addressed. At the same time ijn fairness we also recognised the difficult conditions under which \ht

    Our methodology is/was probably different to parties such as the SDLP – for instance we did not ask people to join in the rent and rates strike which ultimately lead so many into poverty.

  • Granni Trixie

    Sorry …the post flew away before I had finished.
    The ending of the second para should read:
    … at the same time recognsing in fairness the dangerous and difficult conditions which the police and their families had to live.

  • SDLP Man

    Granni Trixie

    This is my last engagement with you. Don’t quite know what you mean-your contribution is disjointed. Try a spell-checker.

    We also in the SDLP believe in law and order. Are you challenging that assertion? I’ll re-state again: throughout the seventies and eighties and nineties Alliance again and again challenged the SDLP to “support the RUC” and we refused to do that unconditionally until we got the Patten reforms, which we did.

    As for the half crown a week (12.5p), it was part of the non-unionist community’s peaceful protest against internment. I challenge you to produce statistics as to how many people it led into poverty. Maybe too you can remind us what the Alliance did to protest against internment.