Has Sturgeon thrown a spanner in the works over Corporation Tax?

There is increasing speculation that the Chancellor, George Osbourne is to announce that Corporation Tax powers will be devolved to Northern Ireland. All of the main parties here support the move, so you would think it would be relatively simple to do it. However, the Scottish First Minister, Nicola Stugeon might have just thrown a spanner in the works for that plan as she told SKY News this morning

Not to put the question to bluntly but are we likely to get screwed over by the SNP over devolving Corporation Tax?

, , ,

  • Ernekid

    If an international company wanted to set up a UK base and take advantage of a lower tax rate they wouldn’t take long choosing Edinburgh over Belfast. Scotland is a viable market base, Northern Ireland is hardly that. If there’s going to be Inter-regional competition with in the UK Northern Ireland is going to lose every time.

  • Brian Walker

    David hello Always nice to read a regular blogger with a real name On this topic, see my post below for reasons why I think you can relax, assuming you’re welcoming CT devo for Ni. Inconsistency is fundamental to asymmetrical devolution. The SNP want to have their cake and eat it. They signed up to the Smith deal and within hours denounced it as inadequate. I’d be pretty confident they’ve no chance of CT devo in the first round but it will be part of a later push. Some of them suggest devo max was promised in the Vow. A simple reading shows it wasn’t.

    Devolved corporation tax looks safe for NI. But if it were up to me, which sadly it isn’t, I’d make it conditional on progress with the inter party talks agenda. I’d also like up to date projections for growth estimates with and without a graduated reduction of CT to 12.5% and the size of the block grant to 2019, as further cuts begin to bite. Gaining the powers is one thing, implementing them is another.

  • Superfluous

    Of course the clever thing to do, SNP, is to shut up until we get given those powers then complain afterwards – not mess it up for everyone!

  • Superfluous

    Well, cheap property and cheap wages are an initial benefit. The likes of eBay deliberately set up shop in Dundalk because of cheaper property and a cheaper skilled work force (many crossing the border).

    If Belfast manages to catch up in property and wages then that will be a good problem to have…

  • Ian James Parsley

    I’d disagree ever so slightly, but only ever so slightly, with Brian.

    The SNP may well be in a powerful position come May – I’d say that makes a deal on Corporation Tax 50/50 within 12 months.

    Scotland has no interest in devolved Corporation Tax unless it becomes a direct threat within the UK.

  • Ian James Parsley

    On a separate point, internal to NI politics – are “all five” parties now in favour?

    I’d be nearly certain you’ll see the SDLP swing against now.

    Btw, it is one thing to support in principle the devolution of Corporation Tax, and another to support reducing it significantly (across the board or otherwise) once you have that power.

  • barnshee

    The Treasury is loving it– the more the stupid in the regions get responsibility for– the more the England can keep —come back Hadrians wall

  • Zeno3

    Estimates for implimenting the cut range from £300 million to £700 million coming off the Block Grant. What happens if it is really successful and the costs rise to 3 or 4 times that?

  • Bryan Magee

    It is not in Ireland’s interest for Scotland to be given Corpo-Tax.

    But even if Scotland were given Corpo-Tax, it would be much more costly for them to cut it than for us.

    That’s because we have little business tax revenue to begin with , so the gains are high relative to the losses.

    For them, a tax cut is much much more expensive (at least in the short run).

  • Bryan Magee

    We will find out how it is to be calculated soon, and hopefully the IFS or some other trustworthy body will comment on whether the “price” is high or low.

  • Bryan Magee

    Corpo Tax is not a political winner as it is in Ireland. SNP cutting corpo tax will offer Labour ammo.

  • Bryan Magee

    The TUV is opposed to the devolution of Corporation Tax.

    On of the TUV’s points seems worth mentioning: company profits are notoriously volatile: unlike income tax and water charges, profits can tumble to almost zero in bad times. So there are reasons to be worried about whether the means are there to smooth out such a volatile series of revenues.

  • Ian James Parsley

    Yes, correct. Not one of the main five but they’re working on it!

    They were always opposed, for the record. My own position and that of others has changed given circumstances – I think there was a much clearer-cut case during Brown’s Premiership than there is now.

  • Ian James Parsley

    Just again as a matter of fact, I’m no big SNP fan but it’s not fair to say they supported the Smith Commission Report and then changed position. Actually they were opposed immediately – at the launch, Lord Smith made his statement and John Swinney directly followed, saying that the powers did not offer the devolved administration enough powers (giving employment, tax and welfare as examples).

  • Bryan Magee

    Is that because of the overall fiscal position of the government sector being in a very fragile state? Or is it because the tax-sensitivity of investment choice has diminished?

  • Kevin Breslin

    The volatility of corporation profits will have no effect on the decision, you could justify not taxing any thing at all if you want to use volatility as an excuse. If profits are volatile so are private sector wages, and ergo so is income tax, so I don’t see how that point adds up.

    And the mathematics for the TUV doesn’t work out, either. If a company earns nothing, pays nothing in reduced corporation tax, then the tax rate is at worst irrelevant anyway!

    So companies with small profits will pay less, have a chance to invest in their business, and those who want to make a profit here could contribute to the education, higher education, transport, sanitation, healthcare they and their employees use anyway via income tax, VAT and property taxes.

  • Bryan Magee

    Empirically profits are one of the most volatile things being taxed.

    ROI found out that stamp duty on property sales are volatile – compared to say water charges or local rates other things that don’t depend on property sales – that volatility part of is why they got in bad trouble.

  • Kevin Breslin

    I’ll have to see that fiscal study for one thing. One thing is clear if corporations leave for tax competitiveness, or close down through a lack of profits, tax income on their employee’s wages reduce and their willingness to buy more property has a knock on effect on VAT. Therefore the volatility of what corporations pay in tax is passed onto their employee, their employee’s consumption, the export market and possibly the domestic consumer.

    If that corporation were a key economic driver, there may be third wave effects.

  • Scots Anorak

    The SNP were acting maturely, as voters would expect from the natural party of government. It was imperative to participate in the Smith process to ensure that any powers offered (which they knew in advance would fall short of what they wanted) would not come at a financial cost.

    As for the Vow, although that was always wishy-washy, “devo super max” was promised by No campaign debater George Galloway, while “a modern form of Home Rule” that was “near federalism” was promised by Labour grandee Gordon Brown. Neither has materialised, and ultimately Scots voters’ understanding of the Vow may be more relevant than what it did or didn’t say. I suspect that a lot of people thought that a high Yes vote would lead to devo max. Well, we got a high Yes vote, but there’s no sign of Home Rule, so both Yes and No voters will now be looking to express their dissatisfaction at the polls.

    I also think it quite likely that corporation tax will be devolved to Scotland sooner rather than later. The Smith proposals were all about heading off the threat of EVEL. If the Labour Party no longer has a strong cohort of Scots MPs, or if EVEL has already been introduced, it becomes in its own interest to support further meaningful devolution to Scotland. At the moment, there seems to be disagreement between Labour MSPs and MPs. The MSPs are elected by PR and therefore largely safe, something that cannot be said for Labour’s Scots MPs — so they may not even have to win the argument.