What Northern Ireland really needs is a REAL debate on its economic future…

Why was Sammy Wilson not as keen as some of his unionist colleagues on the Corporation Tax deal? Richard Murphy enumerates the prime reason. Stormont would have to make up the inevitable shortfall… With the banks in regression, and killing off struggling business, no one was taking any chances:

…the last thing Northern Ireland needs to be is a tax haven. What it does require is a real debate on what its economic future should look like. And that’s the issue all its politicians have ducked whilst clinging to this bizarre life raft of an idea that has let them off the hook of responsibility for coming up with some real policy agendas.

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  • Barnshee

    “What it does require is a real debate on what its economic future should look like. And that’s the issue all its politicians have ducked whilst clinging to this bizarre life raft of an idea that has let them off the hook of responsibility for coming up with some real policy agendas.”

    What can they do? Look at what they are faced with

    An area where the “welfare state has produced population levels otherwise unsustainable (and the welfare is being cut)

    An agriculture based community subject to unkind weather conditions competing with better found regions.

    A divided society

    Remoteness fro its markets

    Is it any wonder they don`t want a debate

  • DC

    OK – so a blanket reduction wholesale is clearly not a good thing as it would create nominal companies in NI, setting up here to simply avoid tax and creating zero jobs in the process.

    However, would it not be possible to implement a reduction on a sector by sector basis for example reducing it for industry, labour intensive industries with a view to getting more people off the dole than lining the pockets of a small number of already well performing businesses if not super companies?

  • Gopher

    The executive bottled passenger duty so what hope was there in corporation tax. Half a million people from the North flew out of Dublin last year that’s money our executive threw away Begging bowl politics is the norm here

  • BarneyT

    How do we get NI off life support? The limb has been cut off and kept on ice. The rest of the body has struggled on, done well at times but it can never live up to its full potential, and no blade is going to change that. Meanwhile the detached limb degrades. It went blue a long time ago but now it’s is turning a shade of grey…..ok that’s enough of that as it was starting to turn green

    Taking the view that the current situation is untenable and the money from GB will dry up due to internal pressures, what are the options?

    How do we get full economic co-operation between the two island jurisdictions without addressing ownership or at least a common currency. The ROI can’t and won’t leave the Euro. Perhaps the UK can amend their wait and see approach and offer NI up as a toe in the Euro waters. Surely NI has to adopt the Euro if we are to get the level of economic cooperation on the island that we deserve?

    Let’s hear it from the economists, those that can consider all options without letting nationalist or loyalist inclinations skew their thought process, as invariably I feel, it does lead to the “question”

  • Morpheus

    Joint sovereignty in NI so that instead of the English solely taking the hit (and risk of lowering the corporation tax) it is shared among the English and the Irish.

    Then it’s a matter of a simple equation:
    Total Income – Total Expenditure = Profit

    Currently that reads as £12.7b – £23.2b = -£10.5b
    This is unacceptable so we have to do something about the Income and the Expenditure.

    Income
    Force the banks to make loans to small businesses
    Close loop holes to prevent tax avoidance
    Increase VAT by withdrawing the demand for smuggled goods by harmonising the rules on both sides of the border

    Expenditure
    We make stringent cuts to the £23.2b it takes to run the country:
    Social protection – £7,319 million
    Health – £3,831 million
    Other – £3,652 million
    Education – £2,714 million
    General public services- £2,143 million
    Public order and safety – £1,626 million
    Defence- £1,127 million
    Accounting adjustments- £800 million
    Total – £23,212 million

    We need to get into the situation where income exceeds expenditure as any small business owner and housewife will tell you. We get that in order and NI will be so awesome that GB and ROI will be fighting over us

  • Old Mortality

    A good start would be to understand why substantial numbers of migrant workers are gainfully employed in the productive sector while so many natives languish on the dole?
    I think we all know why but are our rulers likely to tackle radical welfare reform on their own initiative?

  • Neil

    My explanation OM is that so many people would be worse off in work. To tackle this would be to tackle inequality in society. Higher paying jobs would help.

  • aquifer

    A quick way to start making money is to stop losing it. We should look at all the money that goes out of here and try to stop it going. Can we holiday at home, keep an old car running, borrow something instead of buying it, invest in a small local business, eat out, drink coffee in town?

    Computers could help organise this stuff. Although the ‘net looks global its benefits can be local, saving petrol, making connections. Good that Ebay is coming to Dundalk, the Irish presence on Ebay was lamentable despite the benefits of recycling second hand stuff and getting useful odd and sods.

    We should be aiming for a jobs rich economy to blunt the impact of welfare cuts, building sectors such as entertainment. Removing rates for factories and sheds would make it cheap to make things in out of the cold and rain, our non-scarce resources.

    Banks get bailouts. It is probably time to give the long term unemployed a break from dependency and quit insisting that they do no casual work and search for jobs that do not exist. i.e. Just pay them no strings for a while and see what happens.

    One guy had a good idea where the state could guarantee the honesty of an unemployed person. e.g. Acting as an employment agency for them, managing their tax and NIC contributions so someone who is new to employing people could just pay the person 30%, and the government say 30% of the total wage and let a computer do the adjustment of tax, NIC etc. It could all be done online.

    Integrate the schools. People accustomed to dealing with difference will make much better exporters. Really.

    And cut public sector wages. Sorry, but it is wrong that the working poor have to bear both low wages and insecurity.

  • Did anyone see the contribution last night on UTV by the Dublin based economist who’s name escapes me where he made the hugely relevant point about the unsaid elephant in the room affecting decision making in company boardrooms, namely the big “if” as to whether the UK will be in the EU in 5 years time?

  • aquifer

    Sorry that should be pay the worker 70% and the government 30% to take care of the tax. In fact the percentage would not matter, it is the information that matters. 10% paid to government could make it more likely that the employer is not under-reporting, and the government can square up with the person later. Any underpayment of tax and NIC could even be taken off a pension, but the economy would have grown.

    Maybe we also need to think beyond 9-5, when the most creative and capable people already have a job at that time. If business is to be fun why not start at the weekend?

  • Comrade Stalin

    The idea that cutting tax (and correspondingly cutting public spending) can magically generate economic growth is essentially Thatcherism, and as such it’s extremely amusing to hear self-proclaimed socialists and social democrats in Sinn Féin and the SDLP declaiming it.

    Ian Parsley has been pointing out on his blog a number of examples which expose the holes in the theory. We are being told that corporation tax cuts attract inward investment from multinationals, which is fine except a lot of those multinationals have arranged their accounts in such a way that they don’t pay tax anyway. Starbuck’s is a case in point. Moreover, some of the large multinationals located in Ireland employ hardly any people there. Seagate, who control about half of the world’s hard drive manufacturing industry, have their corporate head office in Dublin but they have no factories or significant employer presence in Ireland. In any case, any benefit that we do derive from this may be offset if the US Government ever chooses to legislate to stop large American companies avoiding US taxes.

    As may be guessed I’m somewhat cynical. Corporation tax is being presented as a magic bullet, a one-shot solution that will solve all the problems and allow our local government to avoid having to adopt anything that looks like an economic strategy. The sums that are due to be sucked out of public spending may indeed make things worse. £300m a year, or nearly £1bn in three years, would fund some major infrastructure improvement projects.

  • FDM

    @aquifer

    Enough of these good ideas already, people are trying to troll…

    Removal of armed forces from the region making the six a demilitarised zone saves us I think 1.6billion. Open to correction?

    Banning of religious marches and the extraction of rates from the Orange Order buildings would save/bring in a sizeable chunk. 12th of July road tax. Sure you can walk the roads. That’ll be £120 mate per person. Coat trailing costs money you know. I would say in the region of £30-100m in revenues.

    Draw a line through the stadia developments. ALL of them. Saves us guts of £200m.

    Investment in green energy onshore/offshore. Creation of Ireland-wide Energy company for exploitation of the oil and gas reserves on and around the island. Profits to the state. Queen given the two fingers to her 12 miles from the shoreline. She is the biggest landowner in the UK and doesn’t need the money. If she doesn’t like it tell her she can fight Liam Nesson for it.

    Earl of Shaftesbury told if he can swim across Lough Neagh he can keep it. Otherwise he and the rest of absentee landlords are told to either make the best of what they “own” for the best of the country or take a hike. Enforced repossession by the state and the best exploitation for our collective good of all of our natural resources.

    Completely dismantle InvestNI who are absolutely useless. Sack everyone there. Instead ring-fence InvestNI budget and £200m [stadia money] for research driven spin-outs from the Unis/industry to high tech startup companies.

    Put £500m-£1billion [armed forces money] into infrastructure projects. Roads, rail, airports, telecomms infrastructure to jolt our local economy.

    Put massive “made in one of our counties” badges on all irish produce, north/south/east/west. Encourage people to buy local.

    Make interference with trade a 2-year mandatory sentence. That will keep the knuckle-draggers off the roads blocking trade, movement of people etc…

    Complete integration of all of our services across the island from schools, police, fire, electricity etc… Savings to be had there.

    Since I cannot put a price on any life I cannot say end the inquiries into the past. However a truth commission would give the victims [all of them] the chance at least to hear what happened to the people they cared about without a massively divisive and costly draw on resources.

    And FFS go to Europe with our best people. Tell them, the Germans especially, that our country has been devastated by a war. We need a European ‘Marshall Plan’ to put us back on our feet. Offer speical business rates [with conditions] to companies who want to invest under these maxims.

    If the Germans don’t want to dea then tell we intend to apply to apply to become the 51st state of the United States of America. The US would take your hand-off for such a foothold in Europe for their fleets, airforces and most importantly manufacture of Irish-American goods to close to European markets. An added advantage is that we speak and write their language better than they do, have better soldiers, slimmer and more affable women and kindly built their country for them.

    Good night John-boy.

  • Comrade.
    It is patent nonsense that a cut in corporation tax of itself will generate instant growth. I like your style though in claiming the SDLP and SF are doing just that. 😉
    Despite the remarkable insights of IJP which I somehow missed, practically every intelligent economist will agree with your points above. Indeed most of them have been repeatedly saying the same things, undoubtedly after reading Alliance literature.
    I don’t think you are cynical Comrade, I think, perhaps an analysis is overdue which replicates the real reasons for the southern economy being so successful in attracting inward investment. Are ye on?

  • aquifer

    High rates of corporation tax make it difficult for a company to grow quickly, and companies based on new ideas need to do this to bring jobs.

  • DC

    Northern Ireland’s policy tools for turning around its economy are pretty blunt and wholesale corporation tax reduction is like giving the surgeon a bread-knife than a scalpel when carrying out a triple by-pass or something.

    It’s got to be done in a clever and sophisticated way that attracts labour intensive work than something that is crudely done and smart lawyers are brought in to help businesses hollow out their tax liabilities using any new reduced NI tax set up.

    Although I’ve always believed that devolving the powers anyway but keeping the tax in line with Westminster/UK rate would be a useful starter in terms of getting some raw data on what actual revenue is being raised at the existing rate, before considering dropping it further or indeed raising it, if NI were to have the powers. At the moment this is unclear and people are plucking figures out of the air which if higher than expected would have a corresponding knock on effect on the block grant – and these kind of uncertainties are never good things to have when making decisions. Known unknowns.

  • Comrade Stalin

    bangordub,

    You can find Ian’s point of view on his blog.

    The thing about the corporation tax is that none of the parties appear to have a firm policy on it, almost as if they think they do not need to since the idea is obvious the right one. I could not tell you what Alliance’s policy is off the top of my head (my fault – I haven’t gone and checked) but I imagine they are in favour of doing it, although I’d like to think that they want to see what the cost of doing is first.

    The contrast between the view of Peter Robinson and Sammy Wilson is rather stark. I find it interesting that the DUP has not stopped to ensure that his party are united on this matter before throwing his weight so firmly behind the decision.

    aquifier:

    High rates of corporation tax make it difficult for a company to grow quickly, and companies based on new ideas need to do this to bring jobs.

    The USA has the highest rate of corporation tax in the world, yet it is also the most prosperous and quite arguably one of the most entrepreneur-friendly countries there is, and the place where you are most likely to be able to start and grow a business. Silicon Valley appeared practically out of nowhere, many of those monster companies started out in people’s garages.

    This simplistic analysis is clearly not a sufficient basis upon which to build an economic policy.

  • Otto

    @acquifer

    Good point. There are other ways of reducing CT for growing businesses though. At a really simple level I’ve never understood the economic sense in requiring firms to credit their P&L with stock increases. It’s not as if the vendor hasn’t paid tax on the sale so what you have is growing firms borrowing to pay taxes because they’ve used cash to increase stocks (most likely in a period of economic growth) and lower tax takes as stocks unwind in recession.

    So it seems that if you let growing firms cash account for tax purposes they’ll pay less CT as they grow and tax revenues will be smoother through the economic cycle.

    Maybe I’m missing something but perhaps we might be able to simplify our tax regime rather than reduce the rate to encourage investment.

  • Comrade Stalin

    Economic strategy here should start by focussing on the things that we do well (tech; tourism/hospitality) and ignoring things that are dead (metal bashing).

    I think we do restaurants and pubs quite well. We could do them a hell of a lot better if the government relaxed the ridiculous licensing restrictions around the licensed trade – cheap and easy to do. If I were in charge, I’d consider quite seriously measures such as legalizing (and regulating) gambling.

    I mean, right now we’re going into the Easter weekend. Pubs are all going to close at 11PM. I can’t think of a more obvious way to tell visitors and tourists that they are not welcome.

  • Otto

    That’s an interesting idea Comrade. The super-casino planned for Manchester didn’t get through so the UK has no Vegas style casinos. Is gambling a devolved matter? Vegas-style windowless Super-sized self-contained casinos would suit our weather anyway.

    We could build a few in the Titanic Quarter – close to the Waterfront hall and the Odyssey for conferencing and sports.

  • DC

    Maybe I’m missing something but perhaps we might be able to simplify our tax regime rather than reduce the rate to encourage investment.

    Or beef up the enforcement of the existing tax regime, redeploy civil servants away from old out of favour policy initiatives maybe away from social regulation lines of work to economic regulation, financial regulation, large swathes of civil service staff moved over to enforcement, tax enforcement.

    Just an aside but I guess maybe still related the UK Border Agency is being taken back into the Home Office. I bet there would be a lot of people willing to volunteer to do this work or would do this work on the cheap – such as carrying out immigration checks across the community, if you weed out illegal workers using the ‘big society’ approach (local people spot checking local takeaways etc – legitimately deputised as immigration officers and able to do so) you weed out cash in hand working and increase tax collection by closing illegal chineses for instance. You divert customers and money into the hands of legit takeaways in doing so.

  • DC

    If I were in charge, I’d consider quite seriously measures such as legalizing (and regulating) gambling.

    http://www.bet365.com

    Gamble away 24/7 lad.

  • Otto

    That’s for addicts DC. I think Comrade’s thinking more about the shopping, blackjack and a show market.

  • JH

    Few points Comrade. Sorry, I just can’t let ’em go!

    “The USA has the highest rate of corporation tax in the world, yet it is also the most prosperous and quite arguably one of the most entrepreneur-friendly countries there is…”

    When you have such huge competitive advantages as the US; such as a large venture capital base, single currency for large number of people, central federal legislature, you can afford to have a higher corporate tax rate.

    However, when comparing a relatively homogenous situation, i.e. Dublin and Belfast, I think it’s fair to reasonably expect similar trends when taking similar strategies.

    “Moreover, some of the large multinationals located in Ireland employ hardly any people there.”

    Which is true. ‘Some’. Others are investing in creating a huge outreach to bring skilled workers into Ireland, as there are 5000 engineering jobs sitting unfilled. You take the bitter with the better. And the better in this case has had the effect of not just creating a class of very wealthy software engineers but a trickle down into native start-ups, an increase in venture capital and tens of thousands of ancillary jobs.

    I do agree with you 100x on this though:
    “right now we’re going into the Easter weekend. Pubs are all going to close at 11PM. I can’t think of a more obvious way to tell visitors and tourists that they are not welcome.”

    The way I see it the Assembly has very few levers of control to come up with answers to the economic situation here. Westminster has us last on the list of priorities and, frankly, the mask is starting to slip.

  • Otto

    @FDM

    That 51st state thing. My kids are totally Disney-fied anyway. And Belfast is closer to Washington than Anchoage or Honolulu. Not totally mad.

  • aquifer

    “5000 engineering jobs sitting unfilled”

    That is quite a ball and chain.

    Do we mind which colour?

    Get those visa presses rolling

    Free come and see visits?

    All our airlines cannot be using all the planes all the time

    We need to fill those houses, and we have empty schools.

    An intensive business english for engineers programme in Leitrim?

  • Comrade Stalin

    DC, that’s a bit like telling people to sit in the house with a carryout rather than go to the pub. Not really the same thing is it ?

    Otto,

    Gambling is indeed a devolved matter, and recently it was reviewed and we chose to pretty much keep it the way it was.

    A colleague at work was in Citywest in Dublin last week and noted that there was some poker tournament going on that was full of Norwegians. It was explained to him that for a number of reasons it’s cheaper for them all to fly over to Dublin and book a venue there than to try to do it back home. We’re missing a trick there.

    JH, yes the US economy is completely different, but this my point; high investment and a strong entrepreneurial culture flow from things other than a favourable corporate tax rate. I’m not sure what the point about the legislature is, corporations in the US often have to deal with three layers of government – we’re rather less bureaucratic here. Single currency is very important too and I think that is the real reason why the Irish republic does so well – it’s an English speaking country with a well educated population within the Eurozone, something we’re never going to have in Northern Ireland whether we cut corporation tax or not.

    Corporation tax cuts are bugger all use to startups, since of course nobody pays any tax unless they’re making a profit, and some small firms may be wee enough that they don’t make enough profit to be taxable anyway.

  • FDM

    @Otto

    That 51st state thing. My kids are totally Disney-fied anyway. And Belfast is closer to Washington than Anchoage or Honolulu. Not totally mad.
    ——————————————————

    Alternatively we could declare war on the US. Let them destroy say Portadown, Larne, Craigavon [if they can find it] and Seaview with nukes or carpet bombing. Then seek a peace deal including a “Marshall Plan” to rebuild the economy.

    It only took Germany 10 years post war to get back on her feet.

  • Reader

    FDM: Alternatively we could declare war on the US. Let them destroy say Portadown, Larne, Craigavon [if they can find it] and Seaview with nukes or carpet bombing.
    A bit like “The mouse that roared”, but with a bodycount. I assume that your loyalist counterparts would submit a different list of towns for the scheme.

  • Otto

    Is FDM short for fledermaus?

    ‘Cos you’re batshit crazy dude.

    See I’m ready. Belfast’s already twinned with Nashville. Let’s get another deal with Atlantic City (they do gambling in the rain too). Yee-ha!

  • FDM

    @Reader

    “I assume that your loyalist counterparts would submit a different list of towns for the scheme.”

    My counterparts aren’t loyalists.

    I would say given their history I would expect their suggestions to be a lot more indiscriminate with end results in the levelling the Shankill Road and Rathcoole.

  • JH

    @Comrade

    “high investment and a strong entrepreneurial culture flow from things other than a favourable corporate tax rate”

    Yeah, a history of strong economic activity. Something we don’t have so instead we have to improvise by doing things like reducing CT to stimulate growth.

    “I’m not sure what the point about the legislature is, corporations in the US often have to deal with three layers of government – we’re rather less bureaucratic here”

    Bureaucracy doesn’t *really* matter, it’s about space for innovation. So long as start-ups similar in industry cluster in common areas the bureaucracy becomes simply a process that is well known and can be dealt with. But the common law across a huge population that all speak the same language and use the same currency creates huge space for innovation.

    I can give an example in Stripe. They’re only now moving over to the UK and will have to roll out state by state in Europe but they’ve already been operating in the US for a year or two. They leave a field of innovation in their wake as well, as they empower people to start tech companies. This wouldn’t be shameful if it wasn’t for the fact that the two founders are young adults from Limerick.

    And that’s why

    “Corporation tax cuts are bugger all use to startups”

    just isn’t true. It won’t do my company that much good in terms of the tax we pay but it sure as hell will attract the people we need to know to this part of the world. Just go to a tech event in Dublin and see the difference; when folks from Google, Facebook, etc are showing up and VCs with cash to spend in a growing tech hub. Couple the CT tax cut with the Seed EIS scheme and in a few years we’re onto a winner here.

  • Coll Ciotach

    At the end of the day all this circus really showed that unionists are clowns. They are at the bidding of the ringmaster at Westminster. Their economic future is entirely the gift of the interest of the south east of London. Stormont is told “Here is your allowance – make do with it as you will” No freedom to make or break their future. Treated like children on an allowance.

  • Old Mortality

    CC
    “Here is your allowance – make do with it as you will”
    Spend it on DLA claims in West Belfast, for example?
    I’m afraid it’s a nashnilist allowance as well.

  • tacapall

    Old Mortality the reality is the British establishment do not want this place being economically successful, they dont want multinational investment, they dont want stability, it sort of upsets the applecart and puts the status quo in danger, its better that there’s instability and economic depravity, its in their interests that this place cannot survive without British subvention, a subvention that underpins our public sector economy, Even the DLA payments in West Belfast keep that local economy afloat. But like a true master, what they give they can take away, its all a form of control.

  • FDM

    tapacall

    “But like a true master, what they give they can take away, its all a form of control.”

    ——————————-

    I have to agree. The analogy I have often thought about is that of an abusive relationship.

    You have the “bread-winner” husband and the disempowered battered wife.

    I understand from looking at the stats that what they call “financial abuse” occurs in over 95% of the abusive relationships studied.

    Bottom line is the poor battered lady can’t walk because she doesn’t have the money to, doesn’t have the power to and is scared out of her wits about the future. The abusers often steal whatever finances the lady does have access to. How much tax revenue actually does leave our shores to the English exchequer? Can we see the books? Can we heck!

    Money is power and a means to control the victim.

  • tacapall

    FDM having gold or silver is power, paper money was meant to be an IOU from a bank promising to pay the equivalent amount of gold or silver on demand, now its backed up with nothing. Now its paying a debt with a debt, the capital of fools.

    This part of Ireland has survived economically since its formation on subvention and division, turmoil and conflict, its only asset is the value it has to Britain’s strategic interests. When that strategic value evaporates so does its subvention or need to be in Ireland, lets not fool ourselves that the British are still here because of some loyalty to those Irish men and women who identify themselves as British. That close relationship between the 26 counties and Britain is getting closer every day, the 26 county government is now actually aiding Britain’s strategic interests overseas by supplying manpower and military expertise. The true reason of British interests in Ireland is slowly evaporating, and so will the border.

  • Morpheus

    “How much tax revenue actually does leave our shores to the English exchequer? Can we see the books? Can we heck!

    The most recent set of books is online at:
    http://www.dfpni.gov.uk/northern-ireland-net-fiscal-balance-report-09-10-10-11.pdf

    NI generates £12.7b but it costs £23.2b – a deficit of £10.5b.

    I think I mentioned that once or twice before

  • Kensei

    Profits generated here will be assigned to companies headquartered in England, so there is a definite under counting.
    Some of that is also cyclical rather than structural – you should be expecting to run a further deficit during a downturn.
    Secondly, you don’t need to put a deficit to zero in order to stabilise the debt. If the deficit is growing more slowly than the growth of GDP it will decrease as an percentage; you also need to take into account what inflation might do to the debt.
    Also are we being assigned costs for the army, the Olympics and a load of other stuff that in an independent or United Ireland context we would not have to face?

    The figure is undoubtedly still very, very significant, but probably also significantly under that estimation.

    Corporation tax needs to be seen as a part of a package. In the South it produced some gaming, and some organic growth. But it was done in conjunction with a lot of other things; improved education, infrastructure, economic incentive zones and generally business friendly polices. The corporation tax is as much as signal as anything else, and having it on the doorstep is undoubtedly a competitive disadvantage for the six counties.

    A package of measures needs put together to shape the type of economy desired. It’s not a silver bullet but variance of corporation tax or matching the South is a perfectly valid part of that. A lot of people here seem again simply because the big two parts are for it.

  • Morpheus

    “Profits generated here will be assigned to companies headquartered in England, so there is a definite under counting.”

    I have heard this argument before but can’t find any documentation on it. The DFPNI report above shows the figures and the £12.7 we generate includes VAT, Corporation tax etc. It breaks down like this:

    Income tax – £2,575m
    VAT – £2,898m
    National Insurance Contributions – £1,946m
    Local Authority Revenue- £1,028m
    Corporation tax (excluding NS revenues) £775m
    Fuel duties – £928m
    Gross operating surplus & rent – £785m
    Other Revenues – £1,769m
    Current receipts (excluding NS revenues) – £12,703m

  • tacapall

    Like I said before Morpheus –

    http://www.sinnfein.ie/contents/26053

    “Not only has the Cameron government reneged on commitments given by the previous Labour government but it exposes as nothing short of political rhetoric, assurances given by previous Conservative British Secretaries of State that ‘Britain has no selfish, strategic, or economic interests in Ireland’. (Peter Brooke) And ‘We’ve got to stand by Northern Ireland for a further stage, with this very special arrangement (transfer of Corporation Tax powers), to help Northern Ireland grow its economy and become self-sufficient,” (Owen Paterson 30th March 2011)

    This rejection by the British government should highlight the need for a robust and honest debate on how we can best manage our own economic affairs successfully. Economists, academics, educators and the business and community sectors should be central to driving the debate and demanding actual figures instead of copying and pasting British treasury figures.”

  • Kensei

    A breakout like that doesn’t tell you if Tesco is reporting any corporation tax generated here in England; you’d need further detail.

    If they aren’t, what mechanism is allowing them to do it?

  • Kensei

    It’s interesting to compare to the UK wide figures:
    http://www.economicshelp.org/blog/4001/economics/tax-revenue-sources-in-uk/

    NI
    Income tax – 19.7%
    VAT – 22.8%
    National Insurance Contributions – 15.3%
    Local Authority Revenue – 8.0%
    Corporation tax (excluding NS revenues) – 6.1%
    Fuel duties – 7.3%
    Gross operating surplus & rent – 6.1%
    Other Revenues – 13.9%

    UK
    Income tax – 30%
    VAT – 17%
    National Insurance Contributions – 19%
    Business rates – 5.0%
    Council Tax – 5.0%
    Corporation tax (excluding NS revenues) – 8%
    Fuel duties – 5%
    Other Revenues – 11%

    Corporation tax looks somewhat look, but not a huge differential. The income tax / VAT / NI split is interesting. Why is our income tax take, so low, proportionally? Lack of high net worth individuals or a lack of employment? It also suggests the VAT increase hit us harder than subsequent income tax cuts.

    The spend side would be interesting.

  • sorleyboy

    We need to boost the rural economy out of its slumber. We need to get real about diversification and stop seeing the land as something to keep people out of. Activity tourism works in Scotland to the tune of around £2bn per year. They realise its importance and have enacted legislation which provides the appropriate legal framework – guaranteeing access to the mountains and coastline, while developing a network of low level paths and tracks. If we could exploit our landscape by improving access to it (while giving it better protection so that people will actually want to visit), then we could enhance our overall tourist and rural economy sectors quite considerably.

  • Old Mortality

    Tacapall
    If McKay thinks Treasury/HMRC numbers are wrong, why doesn’t he tell us what the correct numbers are. Why can’t SF do a bit of research on the matter and publish the results?

  • FDM

    @Morpheus

    A company registered in GB makes its tax payments there, not in NI. Tesco I think our biggest employer in NI doesn’t pay any corp tax in NI.

    This is the fundamental problem with those figure Morpheus I understand. If you are not an NI registered company, your additions to the totals are not counted here. Open to correction?

    Hence those figures are short.

    Can we see the figures please and have the real picture?

  • DC

    the numbers are wrong because UK profits have not been separated out into regions, they are all posted as one usually in london i think, although devolving powers to stormont even at the existing rate would mean legislation could be introduced stipulating that all companies separate out NI based profits for the purposes of falling into line with the new regionally controlled NI corp tax regime. This would help disclose what money is being made here, before considering to reduce the rate further.

  • tacapall

    Old Mortality because no-one except the British government really knows how much it costs to maintain their presence here, I suppose it ffluxuates every year depending on the security situation. I dont know if the subvention includes the activities of MI5 or intelligence based operations conducted by the British army in the north and south of Ireland.

  • UserAinm

    DC

    I’m working my way through this thread but I have to say I’m already floored this:

    ‘Just an aside but I guess maybe still related the UK Border Agency is being taken back into the Home Office. I bet there would be a lot of people willing to volunteer to do this work or would do this work on the cheap – such as carrying out immigration checks across the community, if you weed out illegal workers using the ‘big society’ approach (local people spot checking local takeaways etc – legitimately deputised as immigration officers and able to do so) you weed out cash in hand working and increase tax collection by closing illegal chineses for instance. You divert customers and money into the hands of legit takeaways in doing so.’

    So the economic woes of the country should be laid on the shoulders of a few illegal workers rather than those at the top of the chain playing mega poker? While your style of social correction may be popular with Sheriff Joe Arpaio I thank the stars that we are not likely to see such posses here anytime soon. Seriously DC I thought better of you.

  • Comrade,

    ‘Economic strategy here should start by focussing on the things that we do well (tech; tourism/hospitality) and ignoring things that are dead (metal bashing).’

    I can see the temptation in this thinking but I have to disagree or sound a word of caution may be more apt. If the executive decide to pick specific ‘winners’ then they need to do so with a massive health warning because it begs the question; what happens if you pick the wrong winner?

    I’m not saying we shouldn’t focus on things such as tourism for instance (I think if you show someone North Antrim or Belfast on a night out they’ll come back and people here in QLD love Ireland and want to go back) but what I am saying is if we have some kind of top down policy where people starting businesses not considered to be vitally important or on a list of businesses that some quango has tucked away somewhere are in some way disadvantaged or not supported sufficiently by government you could strangle a new and potentially lucrative sector at birth.

  • FDM, Kensei,

    ‘If they aren’t, what mechanism is allowing them to do it?’

    ‘Can we see the figures please and have the real picture?’

    Can we do some FOI request with the Treasury or the OFdFM, they’re bound to know otherwise the pair of them are negotiating over a matter where they don’t have any numbers to hand, that would hardly be believable, right? (I’m being deadly serious btw)

  • FDM

    footballcliches at 1:26 am

    Can we do some FOI request with the Treasury or the OFdFM

    ——————-

    I think this may have been tried. I understand there are mechanisms/exemptions whereby a freedom of information request can be refused. It may be that this information is considered rather “sensitive” and therefore is not being released through one of the exemptions [for instance cost of retreival of the information].

    I don’t know this for a fact however and I am open to correction(s)?

  • Morpheus

    I contemplated a FOI request but when I sat down to compose the question I drew a blank.

    “I request a breakdown of the UK tax receipts for the past 5 years showing how much was generated in NI, Scotland, England and Wales for each period.”

    But then I thought about HMRC – would they need a different request?

    I know this is simplistic but I found this from The Guardian which shows that the UK tax receipts for 2010/2011 was £522.4b. This would leave NI’s contribution at just 2.4%. NI has 2.8% of the UK population so maybe the figures are not too far out:
    http://www.guardian.co.uk/news/datablog/2010/apr/25/tax-receipts-1963

  • Barnshee

    ” I’ve never understood the economic sense in requiring firms to credit their P&L with stock increases.”

    And that really says it all sadly its the kind of ignorance incompetence that permeates our society particularly our political class.

  • Morpheus

    Maybe if the politicians had highly qualified, independent special advisers instead of…

    …no, scratch that – different thread 🙂

  • Barnshee

    “Even the DLA payments in West Belfast keep that local economy afloat. But like a true master, what they give they can take away, its all a form of control.”

    Now I know what real idiocy is — so the Brits provide DLA etc to West Belfast so that they can get some of back via (ndirect) Tax The English long for the day when the whingers in the “regions”get dumped (and their just desserts)

  • Reader

    Barnshee: Now I know what real idiocy is — so the Brits provide DLA etc to West Belfast so that they can get some of back via (ndirect) Tax
    I don’t think he was complaining about the fractional clawback through VAT. I think he was complaining that it’s a bribe that isn’t guaranteed for all eternity.
    Whether the local implementation of DLA is actually a bribe, I leave to the two of you.

  • Barnshee

    “Can we do some FOI request with the Treasury or the OFdFM, they’re bound to know otherwise the pair of them are negotiating over a matter where they don’t have any numbers to hand, that would hardly be believable, right? (I’m being deadly serious btw”

    They simply do not know How much of (eg) Tesco`s Corporation Tax is attributable to N Ireland – not disclosed by Tesco— the same applies to any other “multis” trading in NI –don`t know guv. The data can only be supplied by the companies involved -at whose cost?

    For what its worth back in the distant past the research I was involved in ran into the same problem. -Detailed information was not available because we could nor establish how the organisations allocated expenditure against cost/revenue centres -“commercial in confidence ” I remember being quoted extensively.

    HMC as they were -were fairly helpful -we did establish that Vat receipts were effectively balances by refunds to (largely) the farming community. The figure that stuck out was the relative balance between the relative size of the NI population (Think 2.55% or thereabouts) and the associated irelative nbalance with revenue collected and benefits paid- essentially N I not paying its share.

  • Barnshee,

    I think this matter is one where the public’s perception or belief in the power of its elites is so much greater than there actual purview, kudos to them for fooling us into thinking they may have a grasp of the figures when they’re pissing in the wind just like the rest of us.

    All kidding aside, most items at tescos have a bar code, we should be able to figure out how much they sell in NI from that, right? That could give us a grasp on the figures, no? Others may be more difficult due to accounting chicanery but where there’s a will..

  • Morpheus

    I see what you are saying – when a company pays it’s VAT or Corporation Tax bill they make a cheque payable to HMRC:
    http://www.hmrc.gov.uk/payinghmrc/vat.htm
    http://www.hmrc.gov.uk/payinghmrc/corporationtax.htm

    At what point is that figure included in the £12.7b figure for NI?

    Are we being screwed here?

  • Probably is the simple answer but I was thinking more of the organisation that runs bar codes, someone keeps records of what is sold by way of barcode. Now, I know other organisations like IT companies etc dont sell there wares by way of a bar code but there are ways we could figure this out.

    I’m not saying it’ll be simple, but it would e in everyone’s interests if we had some transparency as to what is sold and where, you know, numbers and figures.

  • Barnshee

    “Are we being screwed here?”
    Do you pay tax ?then by definition you are being screwed

    The problems arise because the systems are not structured to allow comprehensive read down to regional level.

    On the face of it VAT for example should be easy to identify- at one level it is An analysis of all vat businesses in NI OK so far -but what about businesses in the rest of the UK whole sell to NI how is that vat element be established Briefly it was done by survey with calculations at 95%confidence levels applied to the data. providing an estimate of Vat attributable to N Ireland (Woops its starting to get too technical)

    The same approach was tried for Corporation tax but it ran into the unwillingness of Corporations to disclose and/or calculate profits on an area basis and the dreaded “commercial in confidence”

    A sort of estimate was established by comparing NI pop. size with UK total Expenditure surveys GDP. gross tax receipts and hey presto a cost benefits (No pun intended) analysis.

    More attempts made to establish exact figures simply established that the systems and structures necessary to provided detailed answers did not and do not exist.

    (here is a PHD laying around in research on this topic surely some political party will fund it? )s

  • Otto

    Ignorance Barnshee?

    Go on then. Help me out of my ignorance. Why should stock increases be treated (effectively) as income in a CT return when the vendor has already paid tax on the sale, when no similar adjustment is made in VAT calculations, when the result imposes cashflow pressure on growing business and when validation of the valuation requires (otherwise needless) HMRC audit?

    Why not let firms better align tax payments with cashflow?
    I’m not a member of the “political class” btw. I’ve never taken a public sector wage. I am an interest member of the business class though.

  • A PhD, an idea close to my heart as I contemplate one on the North and business…

    There’s a definite PhD in there re the numbers and figures regionally throughout the uk but ultimately aside from guesstimates you’re going to need HMRC or the Treasury on board and they’re not going to rock the boat with business, or at least the current regime won’t.

    Best you can do, IMHO is vat recents, barcodes, bank account oversight of some kind and projections. I’m a financial services kind of lawyer, not a numbers guy, unfortunately, so I defer to others and the best and most technically efficient way to proceed…

  • Morpheus

    Personally I think that this is really important.

    Maybe we are not the scroungers we are made out to be.

    Maybe we are closer to being self-sufficient than any of us previously thought.

    Maybe, just maybe we could hold our heads up high for a change.

  • Barnshee

    OTTO OK here we go using Stock only as an example
    (Remember Stock exists at both ends of an accounting period)

    Say your wealth is a STOCK of 10000 litres of fuel Bought using £10,000 ie you net worth is 10000 litres value £10000

    Over the year you Sell you oil for £ 20,0000 At the year end with the £20,000 you buy 20000 litres of oil value £20000 ie STOCK value of £20000 your wealth is now 20000 litres of oil value £20000

    YOUR NET WORTH at the END £20000
    YOUR NET WORTH AT THE START £10000
    IMPROVEMENT IN NET WORTH (PROFIT) IS THUS
    £20000-£10000 =£10000

    Ignoring stock thus understates or overstates profits depending on whether stock increases or decreases over the trading period.

    (This blog is turning into a FE college or worse)

  • Otto

    Now you’re (I really hope) confusing your accounting policy with your tax policy. Stop digging.

  • Barnshee

    OTTO

    Profit is TAXED –so in the example the profit would be taxed (You cannot establish profit without taking account of the difference between opening and closing stock figures )

    Read up on it

    http://www.icaew.com/en/library/subject-gateways/accounting-standards/uk-ssap

    again the sheer lack of knowledge of thos who comment is depressing

  • Otto

    I say don’t confuse your tax and accounting policies and you send me a link to a second rate accounting body. FFS.

  • Barnshee

    OTTO
    Try this one then

    http://www.charteredaccountants.ie/

    (it carries the same information)

    Tuition avaialable at moderate rates

  • Otto

    Still not addressing the point though.

    This is a thread about CT, not P&L. And more specifically, CT assessment in the context of support for growing business. Guess what. When you fill out your VAT return you get a credit for everything you’ve bought – EVEN if you still own it! Mad I know!

    Applying the same policy in CT calculations really will not have finance directors and tax people waking in nights sweats. And it will make your fairly regular VAT audit a lot closer to your almost never CT audit so we might even save a bit of civil servant time.

  • Barnshee

    OTTO

    When you fill in your CT you get credit for everthing you `ve bought (Tax is an appropriation to the P&L)

    Ignorance is bliss

  • DC

    So the economic woes of the country should be laid on the shoulders of a few illegal workers rather than those at the top of the chain playing mega poker? While your style of social correction may be popular with Sheriff Joe Arpaio I thank the stars that we are not likely to see such posses here anytime soon. Seriously DC I thought better of you.

    No no, it was just an idea in response to the seemingly failed approach to immigration management, I did also petition for senior CEO bankers to have their assets and bank accounts frozen and money seized and a proportion of their wealth returned to those banks that they oversaw the bankruptcy of…plus it was in the context of enforcing the existing tax regime, thereby supporting legal businesses that pay tax, rather than turning a blind eye to those in the shadows paying cash in hand to some.

    You wouldn’t really have little hitlers running about as all would-be big society deputised immigration officers would all still need to be proficient in immigration law and pass exams etc and become qualified before hitting the street and local takeaways, all of this wouldn’t come easily and woudn’t be effortless. Only really committed local people would qualify – and that’s what you want in that line of work, not lazy detached bureaucrats.

  • DC,

    ‘Only really committed local people would qualify – and that’s what you want in that line of work, not lazy detached bureaucrats’

    And then this gem:

    ‘You wouldn’t really have little hitlers running about’

    Note the caveat or use of the word ‘really’. You might have some goose stepping fascist pig running around picking on brown skinned people but we’ll pay out of the public purse for that so they have ‘exams’ and a crash course on how to manage them in detention. I imagine this course would be akin to say, what a bouncer does and how they’re prepared to treat people with respect seconds before a punter’s face smashes by sheer coincidence into their fist, right?

    Of course, that ‘massive’ illegal black market we have here is the real problem in the North, not chronic under investment, not a skills base that’s out moded and not fit for purpose, it’s a few Chinese guys in a take away off the Lisburn Road whose visa may not be up to scratch or they stayed here after uni, have a local business, pay taxes and generally try and stay out of the system due to that grey area they inhabit.

    In the words of Bender, ‘see you at the cross burning Adolf’.

  • Otto

    “Ignorance is bliss”

    It certainly seems to be in your case Barnshee. HMRC guidelines for managing your cashflow so you can pay CT are suggestions that you talk to your bank manager. You may have noticed some issues with that advice in recent years. Perhaps you’re ignorant of those.

    My business pays PAYE, NI, Rates, VAT and CT. Only CT even attempts to link to published accounts, the others are effectively taxes on specific transactions (salary payments, real or nominal rents, vatable sales and purchases). And political decisions are made every year about writing down allowances on classes or purchase which distort the link between the residual value someone might attach to an asset and the written down value for tax purposes. What I’m suggesting is 100% writing down allowances on all asset classes in year one. That may not be as sexy as a headline rate cut but it simplifies tax policy (good thing), simplifies compliance audit (good thing), supports growing businesses at a time when banks are unreliable (good thing), and potentially smooths treasury receipts over the economic cycle (good thing). Even CGT becomes radically simpler (if not quite redundant) as assets have no residual value. That’s a good thing too.

    Now if you can get past your urge to bluster tell the class why it’s a bad thing. And as you’re answering that ask yourself why your obsession with linking tax to reported profit isn’t a concern for HMRC in the other taxes a firm pays – especially VAT.

    I’d suggest your answer is that political expediency rather than economic policy plays a much bigger part in the design of CT policy than your naive attachment to your class room studies allows.

  • Barnshee

    OTTO

    I am chartered accountant auditor and former tax inspector

    I can assure you that annual accounts and reported profits are srutinised in detail by the taxman as they

    1 Provide the basis for the tax charge on profits
    2 Arerused as a compare with returns for Valued dded tax and PAYE Returns to help ensure their accuracy
    I
    used to do both
    PS You only depreciate (write off) capital items
    http://www.hmrc.gov.uk/ct/forms-rates/claims/capital-allowance.htm

    Stock is not a capital item

    http://answers.yahoo.com/question/index?qid=20090912180939AAS7oli

  • DC

    it’s a few Chinese guys in a take away off the Lisburn Road whose visa may not be up to scratch or they stayed here after uni, have a local business, pay taxes and generally try and stay out of the system due to that grey area they inhabit.

    Well if there is a rush on to clamp down on trafficking in NI (framed to clamp down on all prostitution) why not beef up immigration management in the process tackling the above kind of people too?

    Anyway i did say it was an aside to the local economy debate, as the powers for this belong elsewhere but it was just an idea, probably more relevant to certain cities in Britain.

  • Otto

    Barnshee

    I sympathise. It’s no wonder you’re so grumpy but it really leaves you no excuse. Perhaps if our inspectors were a bit less indifferent to a firm’s cash flow (ie ability to pay) we might all be better off. And we’re (or least I’m) not talking about the use of accounts as a check on tax returns. We’re (or at least I’m) talking about the timing of tax payments.

    You’re splitting hairs re stock. My point is about support for investment and capital (or if you prefer asset) growth. Stock was just an example.

    So I’ll return to my original point as we’re meant to be having a discussion about economic poicy. The implication of the tax cut suggestion was that NI should have a separate CT environment to allow us to win more FDI and to promote the growth of indigenous business. A headline rate cut has been refused (for now) but is becoming less important anyway as the UK rate falls to 20%.

    I suggest that NI enjoy (or maybe pilot) a simplified “development zone” CT environment which allows 100% first year allowances on all capital purchases (not just the latest trendy low emmission car) and a 100% provision against stock valuations. We should be able to plead that as these are timing differences and not absolute reductions there should be no change to Barnett formula handouts. The Tory right should live it as the effect is not dissimilar to the simplifications promised by flat tax lobbyists.

    The effect on FDI might not be as great as the rate cut but I believe the effect on investment decisions by SME’s and indigenous businesses would be immediate.

    And it would seem that the Treasury agrees that the timing of write downs is a significant part of the investment decision or they wouldn’t keep buggering about with the value of annual investment allowances.

    Here’s a liberal person making a similar point. Here the argument is for a two year 100% window. I hate that idea to be honest as I think it screws with the most efficient timing of investment for the sake of a short term rush and treats us as Skinner’s mice – prodded and rewarded until we get our decisions right. The temporary (2 year) increase in AIA from £50k to £100k from April 2010 followed by a plunge to £25k in April 2012 would seem to follow the same logic though.

    http://www.libdem-manufacturing.org/the-case-for-100-capital-allowances-for-2-years-gordon-birtwistle-mp/

  • ‘Well if there is a rush on to clamp down on trafficking in NI (framed to clamp down on all prostitution) why not beef up immigration management in the process tackling the above kind of people too?’

    Clamp down? On what, about 200 people? Because this is the biggest problem facing us at the moment or because of us putting some scrutiny on what you say you’re having some kind of incoherent melt down whilst listening to Kate Bush? Something tells me this idea of yours is one you’d always come up with, in good times and ill, only you know why of course, that’s if you’re not lost somewhere in the recess of your own subconscious like in Inception say? Go get Saito DC, don’t lose yourself!!

    ‘Anyway i did say it was an aside to the local economy debate, as the powers for this belong elsewhere but it was just an idea, probably more relevant to certain cities in Britain.’

    Yeah, you just wanted to wheel out your usual shopping list of blaming immigrants and give yourself the chance to mouth off nonsense with adults. You go back to the kids table DC or you’re not getting any Easter eggs today, ok?

  • Morpheus

    Jeeeze, you guys know how to end a conversation 🙂

  • Otto

    Hey I was happy chatting about Comrade’s ambitions to become Bugsy Siegel and then I made an innocuous comment about ways to mitigate CT other than by a headline rate cut and the scary tax collector bit off my head 🙂