Corporation Tax: Picking The Wrong Fight

You might notice from time to time that Foster, DETI, OFMDFM et al. have a penchant for announcing jobs…except they tend to announce a certain kind of job; big jobs, high paying jobs, important jobs, graduate jobs. It’s tough to picture the big wigs rolling down the hill to announce a greengrocers expansion or for the opening of a pub (although perhaps that’s another matter entirely). The digital media, financial and media jobs are without a doubt greater net contributors to the NI economy per-employee than a P/T shop assistant of course, but coupling that with the corporation tax debate leaves me feeling more like Stormont really isn’t that bothered about jobs for the every(wo)man.

Tax Cuts, who wants one? Exactly, it’s an easy sell. Form an orderly queue…except those that would join the queue for the corporation tax cut, wouldn’t have to join it themselves, they can afford to send an employee or perhaps a PA…maybe even outsource it to another Tax Cut Queue Management corporation.  Within my industry, hospitality, Pubs of Ulster have campaigned for the powers to be devolved and for our politicians to make the reduction. As far as I’m concerned it’s the wrong fight…whilst plenty of new bars and restaurants have opened up in the last year, the economy hasn’t increased by the same proportion…customers have the same money to share around more premises…or not share as the case often is. A corporation tax cut would reward those who are more profitable by allowing them to keep a larger share of their revenue…this is great! What does that actually mean?

David Gauke, financial secretary to the treasury told a parliament committee that there are around 66,000 corporations in NI. Of which, 50-63% of companies pay corporation tax. In 2010-11, revenue from northern irish corporations paying corp tax was £775m or 6.1% of all tax revenue from NI. Business rates however brought in £524m in revenue for the same period, representing 4.1% of all revenue. Everybody pays business rates. From Allstate, NYSE, Randox, Moy Park right down to the aforementioned greengrocers and pub. And with the Reval15 about to upset the apple cart (aka send businesses to the bankruptcy queue…more of that in a later article), why are we only helping the big ticket items?

If 50-63% of businesses are paying corporation tax, then 37-50% of businesses  are, obviously, not. There are a number of legitimate reasons for this, R&D for example, creative industries and others…ultimately though, the most prevalent reason for a business not paying corporation tax, is that it isn’t made enough revenue to meet the threshold for paying it. These are companies who are at best, stagnating and struggling and at worst, being shored up by owners remortgaging properties to pay the staff, keep the bills at bay and the doors open. If the UK devolves the corporation tax powers to NI, a recent report by PriceWaterhouseCoopers suggested that matching the ROI rate could cost NI around £280m in the hope that this is enough to draw business north (and indeed east…sorry Donegal!) and and assuming that businesses will look at setting up a base in either ROI or NI will chose NI because we’re just so flippin’ awesome why wouldn’t they… With the reduction in the block grant not looking like changing direction anytime soon, is this really the risk to take? The Economic Reform Group report, The Case for a Reduced Rate of Corporation Tax in Northern Ireland suggested that an equalisation between ROI and NI would be the equivalent to a 2% drop in the block grant in itself…again, with the hope that it pays dividends in 10 years time.

Don’t get me wrong, it’s not that I don’t think that business owners should hold on to more of their profit if possible, I just think that we should be looking after as many people as possible with our next financial power play…if the assumption is that this would cost us in the region of £300m…and business rates are £524m…how about we half business rates…ultimately the money is all from the same place, but instead of redirecting it to those already doing well enough to post a profit, we help everybody…those making profits will have more profit by proxy of paying less rates, those struggling to make ends meet will have a bit of help from the government by making those ends less far apart. I just don’t see why, if we can afford to essentially write off this money in the hope of a return in the future…we don’t do it to the benefit of all and not just those doing alright for themselves. I don’t say this as a business man, I’m just an employee. But I have worked in a business that struggled to make ends meet, and it wasn’t that the business didn’t make good money, it was that rent and rates kept sliding up and up and up until there were no more rungs on our ladder. Cut us all some slack please.

 

If corporation tax devolution does go ahead, I imagine Sturgeon & the SNP would sit back and watch rather than continue actively campaigning…they can learn from our rights and wrongs on it; I’m just not sure Northern Ireland is cut out to be a political pioneer. On another note…I oppose the layman opinion of “those eejits up at Stormont, they’re useless”…You can’t tar everyone with the same brush, it just doesn’t work like that. There is definitely something to be said for how backwards our system is, how tough it seems to be to progress the most sensible of motions…the posturing that periodically seems to suggest that direct rule wouldn’t be opposed entirely, “let them make the tough decisions”…perhaps the executive want this decision because it looks like an easy win… Business rates is an everybody wins…THAT’S the easy win.

Kris tweets ferociously as @belfastbarman and runs an associated site, www.belfastbarman.com where he occasionally opines his views. He lived abroad for a while and as such, feels he will never really ‘get’ this place. Formerly a barman, he regularly broke the cardinal rules of, “No politics or religion in the pub,” as such, he turned to writing. Previously a stand up comedian and an animal crematorium assistant, now works in marketing and is a recently joined member of the Alliance Party.

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