Should we live within our means, tax a bit more and depend less on Mother England?

Meanwhile just as the Assembly has broken up for the summer (apart from the recall to debate Housing- gate) the Northern Ireland Council of Voluntary Associations announces that the time is right for a debate on tax raising powers and has commissioned a report from PWC. That should keep them all busy for what’s left of the marching season. Nevertheless full marks to an important part of civil society for raising a real policy issue. The deadline of 2014 for a UK decision on differential corporation tax gives a time frame for the wider debate. In the Bel Tel economist John Simpson sets the terms.

The present arrangements emphasise the dependence of Northern Ireland on UK Exchequer discretion. A subvention of nearly £10bn sustains a public sector spending arrangement which allows public sector spending to be some 20% per head above the UK average.

80% of the current revenue raised in Northern Ireland comes from five sources. In descending order, according to the Department of Finance and Personnel, they are Vat £2.9bn, income tax £2.6bn, national insurance £1.9bn, fuel duties £0.9bn and corporation tax £0.8bn.

Business and domestic rates are currently the largest revenue -raising taxes devolved to Stormont. Because of the complexities of any suggested further devolution, in practical terms it is unlikely that Vat, national insurance and fuel duties would be devolved. Consequently, the real debate, about the further devolution of major tax revenue, centres on income tax. If Stormont held devolved authority for the raising of income tax, how would this authority be used? Would income tax be increased to raise extra revenue? If decreased, what public services would be reduced?

It’s not John’s style to spell it out too brutally. But note that corporation tax raises only £800m (corrected). Is this an argument for keeping it or reducing it? In the NICVA video my colleague the devolution expert  Alan Trench makes the interesting point that if we want a different sort of welfare state from the kind the Tories are trying to implement in England, we will need tax raising powers.

Income tax then, is the one to home  in on.  But the report says:

There is considerable uncertainty about the extent of responsiveness on the part of employees to tax rates and the elasticity of labour supply. This is both in general terms and amongst Basic and Higher Rate.. but there are indications form the external evidence that  if the  Assembly wished to maximise revenue it would increase the Basic Rate by a small amount and hold the Higher Rate at current levels..

it is much less clear, based on the past performance of the Northern Ireland economy, that Northern Ireland would be able to grow its regional Income Tax base above the UK average.

This boils down to a view that there aren’t enough higher tax payers to raise significant revenue and the only choice would be to raise the basic rate. ( This by the way running alongside a separate ” debate” about differential public sector pay in lower cost regions like NI ). Even then, would  it be worth raising  income tax when faced with the corresponding cut in the block grant?

Bearing in mind the political consensus over water charges and rates, who in Stormont is up for ending “the dependency culture?” ( “a very, very brave  decision, minister! Perhaps more study needed?”).

  But let’s not closed down the debate before it starts. Now then. Who’s opening?

 

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  • Cric

    Raising income tax would be suicide – the wages are already a fraction of what they are almost everywhere else in the British Isles. In 7 years of keeping an eye on the N.I market I haven’t been able to find a job that wouldn’t require at least a 50% drop in wages from what I can earn elsewhere. Upping income tax with low wages will just add to the brain drain.

    In the model that we should follow should be similar to that of the Isle of Man which has zero corporation tax, a 20% maximum income tax, no Government debt and yet raises more tax per head of population than the UK.

  • Cric

    Oh and £0.8bn is £800m, not £800k (sorry).

  • Reader

    I have no objection (in principle) to trying to balance the books in the long term. However, if we are going to mess about with revenue we really ought to try something that might spark a bit of growth. Or we could try reducing overheads to doing business.
    That’s why any discussion so far has centred on corporation tax. Putting up income tax just looks like masochism.

  • Morpheus

    “But note that corporation tax raises only 800k. ”

    Slight typo Brian. In 2010/2011 the NI take from Corporation tax was £775M (not k) or to give it the full respect it deserves (because these astronomical numbers have lost all meaning these days) £775,000,000

    I disagree with squeezing those already in work and businesses harder for more taxes. The system needs a total overhaul so that businesses are taxed on revenue, not profit (as per Steve Wazniak) and then incentives are given to businesses to get more people into work so they are actually paying tax instead of receiving money from taxes reducing the social security expenditure.. People need money in their pockets so they can pay VAT on things like cars, pay fuel duty on the petrol to fill those cars, have a drink at the weekend paying the alcohol tax etc.

    I think the Government has been asleep at the wheel for far too long and have not moved to adapt the system to cultural shifts and the monumental rise of global corporatism using the excuses of ‘well this how we always used to do it’ and ‘it would be too complicated’ to stifle change.

  • tacapall

    “Should we live within our means, tax a bit more and depend less on Mother England”

    There was me thinking all along that all parts of the UK contributed to the subsidy we receive thats the first I’ve heard it just comes from “Mother England”

    The whole tax system is as corrupt as the government that promotes it, global companies pay next to no tax, big businesses claim back the majority of what tax they pay in their day to day running costs, a billionaire like Mrs Windsor pays nothing while the joe bloggs of society, the lowest paid have to contribute to the likes of Mrs Windsor, he/she has overheads just like businesses, they pay tax on their wages, National insurance, they pay tax on their food, their clothes, their traveling costs to and from their places of work, their heating costs, their electricity costs, tv licenses, rates and just about everything that they need to survive to be able to work but unlike big business, joe bloggs cant claim all the tax back that he/she pays that enables to them to make a profit from actually earning a living. Can Stormont change that inequality, can Stormont demand the profits the crown makes from seabed rights and other annuities around this part of Ireland goes to the people who live in this part of Ireland alone rather than that banking cartel known as the crown whos greed and lust for power has enslaved all of us for centuries.

  • Reader

    tacapall: can Stormont demand the profits the crown makes from seabed rights and other annuities around this part of Ireland goes to the people who live in this part of Ireland alone rather than that banking cartel known as the crown whos greed and lust for power has enslaved all of us for centuries.
    Haven’t we done this before? The money from the Crown Estates goes to the Government, not the Crown.
    As such, whatever emotional impact the label might have on you, it’s all just money into a bucket. If the Shinners stormed the Crown Estates properties, planted the flag, collected the rents and fees, it’s still just money that would be deducted from the block grant.
    It is hypothetically possible that the Assembly could manage the Estates more efficiently or ruthlessly than the existing management, and derive a net benefit for Sammy Wilson and the Stormont accounts – but isn’t that really, really, unlikely?

  • Barnshee

    “Can Stormont change that inequality, can Stormont demand the profits the crown makes from seabed rights and other annuities around this part of Ireland goes to the people who live in this part of Ireland alone rather than that banking cartel known as the crown whos greed and lust for power has enslaved all of us for centuries.”

    Delighted old chap- how much is it?? — I`ll just deduct that from the block grant

    “big businesses claim back the majority of what tax they pay in their day to day running costs”

    Business set all costs “wholly and exclusively” incurred in their trading against revenue Profit is what is left – Tax is an appropriation of profits not a charge against profits

    “There was me thinking all along that all parts of the UK contributed to the subsidy we receive thats the first I’ve heard it just comes from “Mother England”

    The entire charade is subsided by the tax take from the wealthy parts of the UK mostly the SE corner of England

    Simple question for the enthusiasts for local tax powers
    1 Which taxes will you put up ?
    2 Which taxes will you reduce?

  • Cric

    As much as tacapall may have went astray blaming the crown his general argument is correct. The income taxation system now is hugely unfair to the average person who hasn’t got the resources or knowledge to minimise their tax bills. The Government lowered the 40% threshold to £32k this year – the average wage in London is £34k (and you need that in London to live a very modest lifestyle). After National Insurance an average person in London gets nearly 50% of every penny they earn above £32k taken off them. This is not taxing the rich and giving to the poor (which was the original intention of the upper rate), this is taxing the average to the point that they can never be greater than average.

  • Barnshee

    “The system needs a total overhaul so that businesses are taxed on revenue, not profit (as per Steve Wazniak)

    Er businesses are already “taxed on revenue” – (its 20% vat on gross revenue for all vat businesses)

  • Barnshee

    “After National Insurance an average person in London gets nearly 50% of every penny they earn above £32k taken off them”

    Er no The higher Rate applies to income AFTER deduction of the personal allowance (currently £9444) which moves the threshold to £42K approx

  • tacapall

    Reader the money made from crown assets does not go to the government it goes to that entity known as the City, that banking cartel controlled independent part of the UK that has since “The glorious revolution” used the gullible subjects of the other crown, the monarchy to rape and pillage half the world and yes obviously its all about money, just like all wars waged by corporation UK is or was – about money.

    Is it really really possible that we could manage our own affairs and make our own decisions and benefit from our own resources, well yes it is, isn’t that what this almost thousand year war was/is all about – Irish people deciding their own destiny and running their own affairs without interference from both sets of crowns.

  • Cric

    @ Barnshee

    Oops, admittedly I haven’t lived in the UK for 7 years and was in the lowest tax bracket when I left so don’t have much practical experience of what I’m talking about.

  • Barnshee

    “Reader the money made from crown assets does not go to the government it goes to that entity known as the City”

    The only “crown assets” I can find in NI are the bird reserves in Strangford and the Copelands run by those fascist agents of the crown er the RSPB.

    A comprehensive list of these “crown assets” would be a big help

  • Reader

    tacapall: Reader the money made from crown assets does not go to the government it goes to that entity known as the City, that banking cartel controlled independent part of the UK that has…
    It must be a real hush-hush operation, because the Crown estates website says it all goes to the treasury:
    http://www.thecrownestate.co.uk/
    “We have today announced another record financial result, posting a profit of £252.6 million which we pay entirely to the UK Treasury for the benefit of the nation’s finances.”
    So – where do you get all this stuff?

  • tacapall

    What about Lough Foyle, Carlingford lough. the mineral rights to the seabeds in those loughs and within the borders around our coastline. These people –

    http://independencedaily.wordpress.com/2012/04/01/new-post/

    having these rights –

    http://www.friendsoftheirishenvironment.net/paperstoday/index.php?action=view&id=15347

  • Barnshee

    http://independencedaily.wordpress.com/2012/04/01/new-post/

    Er no this is a tirade of unconnected gibberish which somehow transmutes ownership of property in the City of London into
    “The city of London is literally controlled by an offshore corporation.”

    Facts please

    The same item claims

    “Queen Elizabeth Has Been Accused Of Drug Trafficking”
    (and Elvis lives)

    http://www.friendsoftheirishenvironment.net/paperstoday/index.php?action=view&id=15347

    “It also collects and pays rents to the body from both sides of the loughs.”

    Details pleas

    (In fact no rents are collect from “Crown Estates ” in ROI)

    The “crown Estate ” being referred to is defined as

    “Foreshore in England, Wales and Northern Ireland is defined as the land between mean high water and mean low water. In Scotland the definition is between mean high water of spring tides and mean low water of spring tides”

    The crown estate has no jurisdiction in the ROI it manage s around half of the UK foreshore.

    Trying to control the flow of shit into a shared foreshore (Foyle Carlingford) is a good idea.Don`t shit in my doorstep (Foyle) from yours Donegal)

    Try establishing the facts

  • cynic2

    Great. Just what we need. Middle class well meaning people who run charities focused on their own interests want to stick their hand in our pockets to fund them and other pet causes of our politicians

    The way to resolve this is spend LESS in the public and third sector not more and build a real and effective private sector

  • cynic2

    “a billionaire like Mrs Windsor pays nothing”

    She does pay tax and she’s your Queen too. That’s the agreement we all signed up for so show some more respect

    Isn’t it delicious that every time SF want a Bill passed Marty has to send it to Her Majesty for permission!!! If he does, so can you

  • Old Mortality

    Tacapall
    a.k.a. Daithi O Spairt?

  • tacapall

    “Er no this is a tirade of unconnected gibberish which somehow transmutes ownership of property in the City of London into
    “The city of London is literally controlled by an offshore corporation.”

    Facts please –

    http://www.guardian.co.uk/commentisfree/2011/oct/31/corporation-london-city-medieval

    “Working beyond the authority of parliament, the Corporation of London undermines all attempts to curb the excesses of finance”

    ““It also collects and pays rents to the body from both sides of the loughs.”

    “The British own the seabeds of Lough Foyle and Carlingford Lough, right up to the high–water mark on the Donegal and Louth sides of the Border.

    Now the Crown Estate, “which charges rent to aquaculture businesses on both sides of the Border”, has flexed its muscles on the Donegal sewage plant proposal.

    “Trying to control the flow of shit into a shared foreshore (Foyle Carlingford) is a good idea.Don`t shit in my doorstep (Foyle) from yours Donegal”

    Please imagine a loyalist/unionist lecturing others about causing environmental damage – such a laugh that give.

    Cynic the most dangerous parasite on the planet aka Mrs Windsor pays tax voluntary whenever she feels like it she is not obligated to, feel free to check that fact, she’s not my queen I dont take part in British elections either here or across the water, why would I as an Irishman even register to vote in a British election or believe Britain even has a right to decide whether I can or cant vote and no I dont think it says anywhere in the GFA that we as citizens in this part of Ireland have to swear loyalty to the parasite called Mrs Windsor.

    “Isn’t it delicious that every time SF want a Bill passed Marty has to send it to Her Majesty for permission!!! If he does, so can you”

    Well thats one of the reasons I and many others dont vote for Sinn Fein but Im sure that carrot will come back to bite people like yourself someday –

    “A little-known power enjoyed by the Queen and Prince of Wales to alter new laws is due to be exposed after the government lost a legal battle to keep details of its application private.

    The information commissioner has ruled that the Cabinet Office must publish an internal Whitehall guide to the way the senior royals are consulted before legislation is introduced to ensure it does not harm their private interests.

    The application of the controversial veto was revealed by the Guardian last year and has been described by constitutional lawyers as “a royal nuclear deterrent”. Some believe it may underpin the influence Prince Charles appears to wield in Whitehall over pet issues ranging from architecture to healthcare.

    publication could shed light on a little-known procedure that allows the prince and the Queen “to fiddle around with bills to make sure they don’t affect their private interests”.

  • tacapall

    Old Mortality, enlightenment is unobtainable to those who wear blinkers, but sue you keep on believing in fairy tales like little princesses and I’ll just keep believing we are all born equal.

  • Barnshee

    Repeats the “crown Estate ” being referred to is defined as

    “Foreshore in England, Wales and Northern Ireland is defined as the land between mean high water and mean low water. In Scotland the definition is between mean high water of spring tides and mean low water of spring tides”

    The crown estate has no jurisdiction in the ROI it manage s around half of the UK foreshore.”

    The City of London has no connection I can find with ownership of “crown estates” or property in Ireland North or south

    “Now the Crown Estate, “which charges rent to aquaculture businesses on both sides of the Border”, has flexed its muscles on the Donegal sewage plant proposal.”

    I can find no trace of income from aquaculture in any part of Ireland in “crown estates”

    Note the Crown Estate is limited to the UK

    http://www.thecrownestate.co.uk/coastal/aquaculture/

    “Aquaculture is a major employer and one of Scotland’s most important exporters. We manage virtually all the seabed around the UK out to the 12nm limit, so fish farming operations require a Crown Estate lease. We manage the seabed, but are not a regulator of and have no statutory function in relation to the fish farming industry.”

    Sorry to upset your apple cart with the facts

    http://www.thecrownestate.co.uk/news-media/myth-busting/

    PS “don`t start a research degree your “spade work” is terrible”

  • tacapall

    Barnshee thats, posting up evidence from the crown estate website, such a laugh, thats a bit like the HET’s Special branch officers investigating themselves, I note you have nothing to say about the article in the Guardian link I posted – just cant get your head around it can you. But heres a link for all the bible thumpers at the field

    http://www.biblebelievers.org.au/empire.htm

  • Barnshee

    T
    http://www.biblebelievers.org.au/empire.htm

    What has this got to do with tax?

    This is a discussion on the tax position or lack of it in NI
    What has the city of London and its local governance got to do with it?

    (By the by all city of London activities are subject to UK law on company law and tax. If their are problems these are the areas that need altered)

    The Crown estate is subject to audit office scrutiny
    are you suggesting that they have:-
    1 Obtained property and or rights in the ROI ?
    2 Charged and obtained income from these ?
    3 Hidden this income from the Treasury and the auditors?

    (Not for the first time did) I assume that contributors knew what they we talking about)