Treasury says “no way” Scotland is getting lower corpo tax…

John Swiney’s putting up a fight for Scotland to have whatever Northern Ireland bags in terms of its own corporation tax rates. Now it remains to be seen what that is.

In fact the Treasury was keen to point out that its new consultation paper “does not make recommendations”. Rather it lays out some of the problems and political conflicts that are likely to arise from varying a business tax within on jurisdiction. If answers cannot be found to those (mostly issues of cost and risk) then it may come at a price that does not suit the incoming executive.

I was interested in the fact that whilst the Edinburgh Chamber of Commerce was in favour, the Scottish CBI is not, and indeed:

Accountant Richard Murphy, director of Tax Research UK, said the cross-border differential would create “lots of documentation, hassle and inconvenience” that could stifle business.

With an economy weaker than Scotlands, and a long land border with the Republic it probably does make more sense for Northern Ireland than Scotland. But tax harmonisation with the Republic will likely be subject to some form of tethering to the wider UK tax rate.

In other words, if the hurdles are jumped on this legislation, it may be some time before 28% becomes 23%, becomes 12.5%.

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  • ItwasSammyMcNally

    Certainly not.

    ..but Ulster should have what Scotland has in terms of income tax,

  • andnowwhat

    I think the Scots are missing the point that NI is on an island with another state that has lower corpo tax.

  • ItwasSammyMcNally

    “lots of documentation, hassle and inconvenience” that could stifle business.”

    This type of language has not yet had any resonance with Unionists – yet (except TUV Jimbo) and it may be the first time that the Unionists pocket has ruled the Unionist heart in favouring greater hramonistion with the other 3 provinces rather than Britian.

    Perhaps Tommo will test the new levels of unpopularity of the UUP further by declaring against it at least for the moment with their usual we like it in principle but we would like to explore if we can embarass the DUP first position.

  • Mick Fealty

    Sammy, I know you like to think of this is an towards an all island policy, but in truth the negative risks of Stormont running too far ahead of HMT have to be charted.

    The Coalitiion is happy to let us try it first: 1, because there is a genuine problem attracting fdi north when big offers are on the line in the south; and 2, our regional economy is screwed; 3, we’re tiny compared to Scotland.

    But it won’t necessarily be cost free.

  • JH

    Nice use of ‘corpo’!

  • nightrider

    http://www.telegraph.co.uk/news/uknews/northernireland/8404401/New-tax-deal-for-Ulster-could-break-the-Union.html

    Is anyone really going to have the balls to take the gamble? And it is an almighty gamble.

  • orly

    Could it not be done?

    In Canada each province sets their own income tax and corporation tax rates.

    So in Alberta you pay flat 10% income tax. In Nova Scotia it’s up to 21% depending on the level of income. For corporations it seems to range from 10% up to 16% depending on the province.

    Does seem a bit bureaucratic though as everyone files their own taxes which then had to be checked (in a rudimentary fashion) by some bod at the Revenue Agency.

  • ItwasSammyMcNally

    Mick,

    “Sammy, I know you like to think of this is an towards an all island policy, but in truth the negative risks of Stormont running too far ahead of HMT have to be charted. ”

    I wasnt suggesting our good friends the British were motivated to harmonise tax rates across Ireland I was commenting on Unionism’s pragmatism in swallowing a policy which although fitting in nicely with Nationalist objectives for more harmonisation between North and South and (and potentially de-harmonisation with Britain) is also good for the Plain (Business) People of Ulster.

    Of course TUV Jimbo is the exception to this pragmarism and possibly yet the hapless Tommo who has yet to declare his hand? Or has he?

  • Brian Walker

    I had to post too early before later reports came onstream. Following the above, the redoubtable unionist Scottish correspondent of the Daily Telegraph Alan Cochrane
    wrote:

    “This may well be of benefit to the Northern Ireland economy but, frankly, it would be a political disaster for the Union. If Mr Osborne does allow such a dramatic reduction in the level of corporation tax to be levelled by the Belfast Assembly, then there no absolutely no way that he can deny it for the Scottish Parliament… ( and he goes on to say, Wales and some English regions.)

    http://www.telegraph.co.uk/news/uknews/northernireland/8404401/New-tax-deal-for-Ulster-could-break-the-Union.html

    There’s no doubt that taxation powers are the real test of devolution. “No representation without taxation, “as the Amercan colonists might have said. Scottish Conservatives like Major’s Scottish secretary Michael Forsyth fundamentally oppose any separate taxation powers at all. No doubt such powers would complicate life, particularly for centrally minded Whitehall and increase rivalries between regions. But it might be argued just as easily that regions with similar ambitions.should co-ordinate their bids to make powerful common cause. It’s far from clear to me why they should break the Union. The case has yet to be made.

  • ItwasSammyMcNally

    Brian Walker,

    Standard Unionist arguement – the question is whether the UUP will row in behind this line of reasoning.

    The issue for them might be whether they will hammered even more if they disagree on lowering Corpo tax before the election.

  • Pigeon Toes

    http://www.publications.parliament.uk/pa/cm201011/cmselect/cmniaf/writev/corptax/we16.htm

    “Corporation Tax in Northern Ireland
    Written evidence from Algirdas Šemeta, Member of the European Commission

    First of all I would like to stress that at this rather early stage of your inquiry I can only provide you with a number of preliminary and general comments from a European viewpoint of direct taxation issues. The principal areas for remarks and comments are (i) the state aid aspects, (ii) the Code of Conduct on harmful tax competition and (iii) the corporate tax Directives.

    (i) State Aid Aspects

    As already mentioned in your letter, there are important aspects from a fiscal state aid point of view to be taken into consideration. The main question is whether the reduced corporate income tax rate for Northern Ireland would fall to be considered as a regionally selective measure and thus as regional aid, compared to the “normal taxation” in the United Kingdom, or whether the planned lower taxation for Northern Ireland itself may be considered to be the “normal” rate of taxation for state aid purposes. Both the Acores and Madeira and the Basque Countries cases examined by the Court of Justice were subject to similar discussions of regional selectivity regarding their corporate income tax rates which were lower than in continental Portugal or in the other parts of Spain. These cases were brought before the Court of Justice and in the judgments [1] the Court has stated that where an intra-State body is sufficiently autonomous in relation to the central government of a Member State, the selectivity would have to be assessed against the context of that intra-state body, i.e. against the “normal” taxation in that region. The Court determined that a region would be sufficiently autonomous to set its own corporate income tax rates where it fulfilled the following requirements:

    · Institutional autonomy: a region should enjoy a political and administrative status separate from that of the central government.

    · Procedural autonomy: no intervention from the central state.

    · Economic and financial autonomy: the respective region should bear the political and financial responsibility/risks for the measures introduced.

    In the Basque cases the Court considered the three requirements to be fulfilled. On the contrary, in the Acores case it declined the economic autonomy insofar as compensatory financial transfers were made from the Portuguese central state. The court applied the same criteria in the Gibraltar case [2] in which it also accepted that the Government of Gibraltar had sufficient autonomy from the United Kingdom to introduce its own tax legislation”…..

  • Driftwood

    Alan Cochrane has it spot on.
    If NI gets a lower rate and it works well for this region then there will be resentment elsewhere in the UK-big time.
    If it doesn’t work out, there will still be a sense of NI enjoying priveleged status as the huge subvention to the province becomes more visible.
    And the idea of an incremental ‘phasing in’ of the lower rate just seems like half hearted experimentation. Companies like to know certainties when it comes to return on investment. They also know a big fat regional guinea pig when they see one.

  • Comrade Stalin

    swallowing a policy which although fitting in nicely with Nationalist objectives

    Maybe we should also lower the rate at which the 40% income tax rate takes effect to £25K (down from about £35K) and increase the rate of VAT to 21% ? Wouldn’t that be fitting with nationalist objectives too ?

    Were Sinn Fein espousing unionist objectives in 2007 when they suggested that the Irish corporation tax rate should be increased ?

    While we’re at it, should we abolish the NHS ? I presume so, since as the RoI has no NHS it would be fitting with nationalist objectives.

  • ForkHandles

    Sammy, have a bit of self respect for dear sake! Everyone with an IQ above 10 knows that a lower rate of corp tax for NI is so we can compete with the ROI. Honestly, i think you may have lost the plot with the whole ‘blogger trying to portray something that is not true, is actually reality’ thing 🙂

    Also, you are included in the term “the British” because you are from the UK. Sorry to have to break it to you 🙂

  • ItwasSammyMcNally

    Driftwood,

    “If NI gets a lower rate and it works well for this region then there will be resentment elsewhere in the UK-big time.”

    Well thats another arguement in its favour.

    ….Unioinsts getting all touchy as their leaders and the Tory government support “lots of documentation, hassle and inconvenience” between Ulster and the Mainland.

    Any word yet from the UUP? Hours of fun.