More ammo in the corporation tax campaign

It’s becoming like buses. For ages the websites remain dormant, then suddenly another bursts into life. The normally tranquil pages of the NI Economic advisory group carry a new report, “Impact of Reduced Corporation Tax,” with yet more forecasts.  You’d almost think a campaign was running.

Employment is anticipated to be 58,000 higher by 2030, representing a6.7% increase from the baseline. This represents an average of over 4,500 additional jobs per year in the longer-term, throughout the economy, peaking at almost 5,800 per annum by 2030.

Foreign Direct Investment is forecast to comprise 42% of the net additional jobs.

This reduction in the block grant cost peaks in 2016 at £242m (or £275m in current prices) or approximately 2.7% of the block grant.

However, it is recognised that the impact of any reductions in the block grant can be managed in a variety of ways. For example, the Northern Ireland Executive, within the last budget period, was able to manage some very significant public expenditure pressures without any apparent adverse impact on overall public sector employment.

More public sector cuts?  A diplomatic silence on revenue raising before 2030?

The model indicates that the net corporation tax receipts are expected to remain negative throughout the forecast period (up to 2030). However, when other tax yields (from sources such as income tax and national insurance contributions) are included then the policy is expected to break-even by 2021 on an Exchequer basis.

In the light of the above, it is important that with the introduction of a reduced corporation tax rate in Northern Ireland, the Executive / Assembly is also able to retain the yields from other related taxes (e.g. income tax and national insurance contributions). These yields would be important as they would offset the reduction in the block grant after an initial period and could also aid in the rebalancing of the economy. Moreover, the positive impacts of this measure should not be diluted by the introduction of additional business costs (such as increasing business rates) that might be used to offset the short-term impact of the reduced block grant.

A  difficult negotiation with the Treasury?

And no magic bullet, the report adds. Yet litttle hope of retoring living standards to their 2008 level without it.

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  • Well, yes, Brian, there is indeed a campaign running.
    It would probably pay to check up occasionally what your fellow bloggers on here are posting.

    Check the update here:
    http://tinyurl.com/3t5xtaa

  • jthree

    Paterson warned the NIAC that they had no chance of getting the Treasury to remit increased consumption tax receipts.

  • Brian Walker

    oneill I did notice but I thought it didn’t quite exhaust the topic. Please don’t be offended

  • Not offended but whether it did or not, a link would have been the traditional etiquette in such circumstances; if nothing else it would have given people more information about the subject in hand.

    However, considering no one seems that bothered about the post or even the corporation tax question as a whole then probably we collectively needn’t have bothered wasting our time with the topic.

  • Frustrated Democrat

    I think there is a misunderstanding of the whole block grant process. The amount of money required to run NI is largely provided by the the Exchequer in London.

    The difference between this and the taxes actually collected here is widely known as subvention, therefore any increase in the income and NHI tax take here will go to reduce the amount of subvention.

    This is not about getting more money to run NI it is about increasing our economy to provide employment and at the same time reduce the amount of subvention, it should of course be recognised that any additional Corporation Tax take would be retained.

    It is also imporatant to understand that the amount of money available in NI will not change by cutting Corporation Tax as the companies will have the additional money from lower taxes to spend that is deducted from the block grant.

    We should not believe that the amount of subvention would be maintained indefinitely if we do not start to take reasonable steps to reduce it, that is why we must make this investment in our future.

  • Brian Walker

    One estimate quoted is break even on the tax take by 2021, quite a long way ahead. And we have to trust the companies who save money oin corporation tax to spend it wisely. All quite big risks at a time of financial consolidation, i.e. cuts. We also have to put quite lot of trust in the Treasury and Oxford Economics models. Adn finally, the EU C, and finally

  • Brian Walker

    damn.. slipped.. the EU Commission would have to pronounce at a time when competitive company tax reduction between States is seriously unpopular. Quite a few hurdles to go over yet.

  • jthree

    Brian, I see what you’re trying to get at here: All the parties are on board (for various reasons), the business lobby groups are hard at it and the press are muted – the Bel Tel (prop. INM) seems to be fully behind the campaign. Who is asking the awkward questions?

  • jthree

    Just in case I appeared cynical about Bel Tel/ INM

    http://www.belfasttelegraph.co.uk/business/business-news/northern-ireland-corporation-tax-decision-lsquoin-the-hands-of-the-peoplersquo-16005272.html

    ‘Vincent Crowley, group chief operating officer of Independent News & Media, added: “We were delighted that the Secretary of State showed such interest in our activities in Northern Ireland. We fully support the campaign to lower the corporation tax rate.”’

  • Brian Walker

    jthree Indeed. The meida is a big eniugh subject for a new post above