Differential corporation tax now looks like a definite runner

As Live blog is on standby, it’s  worth highlighting that George Osborne has just announced he will take part in a  consultation on a lower than a  23% UK corporation tax rate for N Ireland, based on a  paper out tomorrow. He emphasises  this is  due to the “unique” circustances of the Republic’s 12.5% rate (assuming this survives any revised bailout terms intact.) I guess this means lower corporation tax will now really happpen. But when and at what rate? It doesn’t seem like a quick rescue mission, more part of the 25 year time scale mentioned  for switching  emphasis from the public to the private sector. While the main aim no doubt will be to try to attract elusive foreign, mainly US direct investment to complement the  still thriving manufacturing base on the Republic, it will be time  for NI business  to put their money where their mouth is and display real energy and innovation and show they’re worth it.  

GB MPs, especially those from even poorer areas than NI  like the north east will look on this suspiciously. And I’ve just seen a Welsh MP calling for similar concessions forthe arguably underfunded principality. Stand by for lots of similar calls.

At the same time  the Chancellor announced 21 enterprise zones for England, details and locations to be announced tomorrow. These are areas due to enjoy a freeze on business rates and other small lollies. What’s happening  to the enterprise zone for the whole of N Ireland Cameron mooted in the election?  When  he and Business SecretaryVince Cable  announce the locations of the English zones, will they throw in a word or two about N Ireland? Or will it be left to FM and DFM to bask in the glory?

By the way the cut in fuel duty by 1 p a litre is unlikely to deter those  diesel bootleggers..

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  • Henry94

    Great news on corporation tax. There was great scepticism when this campaign started. Not least on Slugger. In economic terms it would be the greatest achievement ever by any Stormont regime.

    In overall terms it would be surpassed only by the policing settlement.

    Hands up now for direct rule!

  • Mac

    “Hands up now for direct rule!”

    Look across the water, the hands will be there. When I mentioned this at the lunch table with london employees of an American company I am doing a bit of work for (I’m an IT contractor) they were very very hostile to the idea.

    “It’s bad enough you lot take all the civil service jobs, you want the service industry too?” to paraphrase one of the service delivery managers attitude.

    Resentment will not be localised to those with geordie accents.

  • Henry94

    Mac

    At least they get the importance of it for jobs. But you should make the point that the kinds of jobs that are drawn to the lower rate are going to the republic now. By diverting some of them to the north it can give the exchequer 12.5% of something rather than 30% of nothing.

    Getting the north on its feet benefits everybody not least by making it less reliant on civil service jobs.

  • Brian Walker

    mac, Re GB objections, I too have been at several forums where the reaction was scpetical to downright hostile. See also NI select commitee hearings on the subject.

  • Might be in favour if it also means scaling our public sector to the Republic’s!

  • Mac

    Henry94
    “But you should make the point that the kinds of jobs that are drawn to the lower rate are going to the republic now. By diverting some of them to the north it can give the exchequer 12.5% of something rather than 30% of nothing.”

    That’s ‘big picture’ stuff Henry, the big picture is irrelevant to the guy who works for a US company that would consider moving well paid IT jobs, a stone’s throw from Tower Hamlets to a stone’s throw from the Divis tower.
    Consequently it’s also irrelevant to his elected representative and the guys who are trying to oust him from his westminster seat in a few years.

    The other scenario is companies do what they have been doing with the republic. Register the company as headquartered in the south and fly the board over to have a meeting once a month followed by a night in the temple bar district.
    I know this happens as a friend who works for a large professional services company has been involved in quite a few ‘relocation’ projects. The net result if they start doing this with NI, is less money going into the treasury and no real jobs to offset the reduction in the block grant.
    It’s lose lose for everyone involved except the company’s shareholders.

    Brian Walker
    “I too have been at several forums where the reaction was scpetical to downright hostile.”

    ‘Unionism’ needs to be very careful here.
    Beyond the bad blood it will undoubtedly create, the whole thing will probably end up been as mismanaged as some of the recent Invest NI funded relocations.

  • Old Mortality

    Henry 94
    There is no way that a lowering of the corporation tax rate will have the same impact as it had in the Republic. For a start, NI won’t attract the Microsofts and similar businesses which can use the RoI to minimise tax on royalty revenues arising outside Ireland from software written in the US.
    Secondly,any company that is growing and investing in the UK probably has an average or effective tax rate as low as 12.5%.
    Teh types of company which will really benefit from a lower tax rate are cash cows which generate more profit than they can reinvest for a superior return.

  • aquifer

    A fast growing company can also have profits, and the less tax the more growth if the company has a winning product to re-invest in?

    Who would want to rely on banks to fund growth?

  • Cynic2

    Owen Paterson had a wonderful grin on his face when it was mentioned. I think the cat has got the cream

  • Cynic2

    “The types of company which will really benefit from a lower tax rate are cash cows which generate more profit than they can reinvest for a superior return.”

    Like manufacturing? We really do need a few mid range cash cows here to mop up the mid range unemployed and take up the slack as the Civil Service becomes smaller as a % of the economy.

  • Comrade Stalin

    For a start, NI won’t attract the Microsofts and similar businesses which can use the RoI to minimise tax on royalty revenues arising outside Ireland from software written in the US.

    Why not ?

  • south_down

    I hope they don’t do something stupid like lowering the rate for new companies ‘coming in from the outside’ (so to speak) while leaving locally based, existing companies paying the full whack.

  • Old Mortality

    Cynic
    ‘We really do need a few mid range cash cows here to mop up the mid range unemployed and take up the slack as the Civil Service becomes smaller as a % of the economy.’

    I hope you’re not one of those people (ie almost the entire political class in NI) who thinks that private sector employment is an unfortunate but necessary alternative.

    And the cash cows I had in mind were supermarket chains but you can never have too many of them can you? After all our witless First Minister applauds their ‘job creation’.

  • Jimmy

    The call for a lower corporate tax rate for Northern Ireland was most vocal during the boom of the Celtic Tiger years.
    Im afraid its too late now for any optomism that it will create jobs. With factorys and manufacturing collapsing all over the Republic why would anyone want to come to Northern Ireland and invest?
    Today on the Nolan Show Martin McGuinness said he knows of many companies who would employ Thousands and Thousands of jobs (his words) In a global recession? he is living in cloud cuckoo land. Any lower corporation tax would have to be balanced with the block budget which would suffer, invest NI would have to pay the obligatory bribes in subsidies and with a rising third world still ready to undercut us, the idea is folly.