I was pleased to note from the FT this morning that in debate on devolution of tax powers to Scotland "all three parties agree that corporation tax should not be devolved to avoid a “race to the bottom” and other tax distortions."
This is not change of my view on whether or not Scotland should have been independent. It is a position within the status Scotland now has.
Given that Scotland is not independent, and given the real risk of a corporation tax race to the bottom, and the massive problems with the EU that any shift in Scottish corporation tax rates would have given rise to (explained here) this decision has to actually be good news for Scotland, who would otherwise have been harshly economically punished for lowering its corporation tax rate, and good news for the rest of the UK, which will saved further hardship by the exploitation of any difference in the corporation tax rate increasing the shift inn the tax burden from capital to labour
Common sense prevailed, for once.
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I would have thought that given how far Osborne and the Treasury have already taken Britain in the race to the bottom on corporation tax and other tax arrangements for big business, there’s no real need for Scotland to try to go any further, Richard. So perhaps it’s just a case of all three parties being reminded of just how generous the Tories have been to their corporate masters over the past four years.
i fear that perhaps maybe you speak too soon , it looks like NI will do it first . . .
http://order-order.com/2014/10/13/tories-love-bomb-irish-northern-ireland-corporation-tax-cut-a-done-deal/
I still doubt that….
As I also doubt its source on every issue
Richard
Interesting paper. One or two bits I’d disagree with.
For example, this bit from page 11 about Eurozone & forex:
“In this context being a member of the Euro is vital: much of the onward
investment and the resulting flows of income that will consequentially flow back
from Europe to the USA will all be Euro denominated. US corporations using
Ireland as an entry point for their investments in Europe therefore reduce their
foreign exchange risk considerably as a result, compared to locating those
investments and sales in a sterling zone. The use of Northern Ireland would
involve two foreign exchange risks. In Ireland there is only one. That would
make Northern Ireland very unattractive by comparison as a result.”
That’s not a problem in practice for flows through the UK because a UK company in that case could (and many such companies do) elect to be taxed in its functional currency and so forex is a non issue.
TB
Richard
This is a bit of a red herring too:
“There is no equivalent arrangement for tax on foreign dividends to be ‘pooled’ like this in UK law meaning that any dividends received by a Northern Ireland parent company from a tax haven subsidiary would be subject to additional tax on receipt meaning that any new tax regime in Northern Ireland would suffer a competitive disadvantage on this issue when compared to the arrangements in the Republic.”
That’s almost certainly not going to be the case. Since July 2009 most dividends received by UK companies are completely exempt so there is no need for onshore pooling.
Who did you get to check the paper technically?
TB
The paper was written some time ago – please note