Credit crunch, FDI and the late arrival of variable Corporation tax rates…

If there is anything holdling the Republic from the brink, it’s huge residual presence of multinational companies who have sited assets there, as a result of a fairly successful long term foreign direct investment strategy. In today’s Irish News, Tom Kelly asks that the new administration impliment that policy seriously in order to ‘turbo charge’ Northern Ireland’s international offering.

With banks continuing to choke capital investment in small scale business as part of their de leveraging efforts, FDI does indeed look like one of the few ways to fulfull Stormont’s promise of 25,000 new jobs. But that raises the question: what has happened to the lowering of Corporation Tax?

Slugger understands that the Treasury, who have never that keen at handing off any form of fiscal control to sub national levels, may be the ones who are holding it up. Given the very belated realisation in London that Scotland is more enamoured of Alex Salmond’s pitch for an independent Scotland than previously supposed may be causing the Conservatives more than good cause for thought we may be waiting some time for that particular stimulus.

Which leaves us without much of a clear response to a widespread job leakage, or much of a ‘game changer’ for would be US investors.

  • The lowering of Corporation Tax is presented as some sort of instant outcome. It is not. The success of the Republic’s FDI is also in the availability of labour due to a small public sector (and getting smaller) and light regulatory touch. Not sure what rebalancing was in the PfG but it didn’t seem to include much about reducing the public sector. And ‘open for business’ to large corporations is hardly the message Sammy Wilson has been sending out in his populist ‘large store’ bashing of late.

  • Old Mortality

    Mick
    The RoI should indeed be thankful for the efforts of the IDA over the years. In a sense, its economy has been dominated by foreign interests since long before the banking crisis. A government desperate to raise tax revenue cannot even contemplate raising corporate taxes.
    In these circumstances, the government should be examining the reasons why a lower corporation tax rate failed to galvanise indigenous enterprise. Instead, domestic capital was dissipated in property speculation. Saddest of all are the stories of small businesses getting into trouble because their proprietors thought that property development was a far smarter way to make money than reinvesting in their businesses.

    Dissenter
    I wholly agree about reducing the public sector in NI. Without it, low corporation tax strategy will have limited success. The clever way to do it is by freezing public sector pay to the point where it becomes clearly more attractive for anyone to work in the private sector. That must include the whole public sector, no precious exceptions for doctors, nurses, policemen etc.

  • aquifer

    The ROI are English speaking smart hard working low tax and in the Euro Zone, of course American multinationals like it there. Cutting NI public sector pay is fair enough when the private sector here often has both lower pay and less security.

    We should reduce Corporation tax here, but never forget that political change in NI waited for change in Scotland and Wales before.

    ‘domestic capital was dissipated in property speculation’ – due to non-existent banking regulation, which also made ROI industry less competitive as wages were driven up by the construction boom.

  • The Republic’s tax haven status for multinationals will end Friday week.