According to the Belfast Telegraph:
The Prime Minister has signalled his willingness to consider a corporation tax cut in Northern Ireland
As I have argued time and again this is the triumph of dogma over reason.
The background to my reasoning is in the paper I wrote for the TUC and Irish Congress of Trade Unions, here. The reasons for objecting are numerous. Let me highlight just three.
First, the chance that such a tax rate could be introduced in Northern Ireland without falling foul of EU law is remote in the extreme. And if it proved to be illegal the damage to the Northern Ireland economy as a result of the consequent uncertainty could be considerable.
Second, the Republic's low tax offering is not just a low tax rate — it's also a low tax base. The tax collected by any state is the tax base multiplied by the tax rate — and because both are low in the Republic then many companies operate there and pay little or no tax at all. This is something Northern Ireland could not emulate unless it were, in effect, to cede from the UK for tax purposes.
But doing that would have massive implications. First, the rest of the UK would then need to put up massive tax barriers to trade with Northern Ireland to prevent artificial tax abuse by companies really located in England, Scotland or Wales, That would be enormously harmful in terms of administrative burden to doing trade with Northern Ireland. And second, if it is assumed that the reduced tax rate will bring in increased taxes in Northern Ireland (and those proposing this idea seem to think that it will — although there is no evidence at all that the Laffer curve on which they base this idea actually exists) then that assumed increase in tax revenue has to be deducted from the subsidy now given to Northern Ireland so that it does not get a double dose of regional aid under EU law. The risk is that if the assumption of increased tax is wrong — as I think not just likely but absolutely certain if the Republic's experience is copied — then the funds available for public services in Northern Ireland will be cut severely. As a result this folly, promoted by the tax accountants of Northern Ireland for the benefit of their clients will impose real and lasting cost on ordinary people throughout Northern Ireland. And that's a risk no one should take.
Which is why I and the trade union movement on both sides of the Irish Sea oppose this move.
And almost certainly why Cameron supports it.
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So is it also a triumph of dogma when the SNP propose that Scotland should be able to do the same?
I realise you think that they are wrong to do so, but are you drawing the same conclusion as to their motive? I’m not aware of a dogmatic libetarian agenda within the SNP.
As an aside, I agree with you that both Cameron and the SNP are wrong, albeit that I’m interested in a comprehensive review of how corporate income and wealth are taxed and how to effectively ensure that they pay their fair share (which, as a whole, they do not).
Yes, I am saying the SNP have been captured by the same dogma: explicitly so
Pretty disappointing in their case
Well, that’s fair enough sir.
Personally, I think they’re just seeing an opportunity to do something which they perceive will benefit Scotland relative to England.. certainly moreso than subscribing to the notion that low corporate taxation is the route to prosperity.
You can’t have tax rate equalisation without causing huge inequalities by virtue of the cost of geography.
Inequalities create unsustainable migratory patterns which has a regulating response to regional growth – assuming migration is not controlled. If migration is controlled, you get one region becoming continually richer than the other, until the whole thing escalates into either boom and bust or military conflict.
And you can’t have tax competition without having a situation where it causes escalating sovereign debts.
Northern Ireland”s tax rates should be reduced to attract economic activity within – and there is nothing wrong with that given the position they are in. If they’re not allowed to adjust, a poverty trap will result which leads to macro-instability amongst its trading partners (that would be you guys then).
All good fun!
With the very greatest of respect – you are talking nonsense
Tax is a tiny component in this – as my work shows. There is a tiny relationship between tax rates and employment rates: so small it is insignificant
Other factors are much more significant: for example you might rightly argue can you share a currency? On a pue analysis basis you might say that geography means NI should have a lower income
The fact is though we have agreed to live in societies: that is why NI does get a higher subsidy than rest of UK
But Cameron forgets that
A far better option for Scotland (and anywhere else for that matter) is for it to move its tax base to land and lower taxes on labour and capital. Scottish land is in general of less value than England. This would attract business to Scotland. This would also enable Scotland to create a virtuous circle of public investment in infrastructure, which feeds directly into land values, providing the revenues for development.
What’s more there are a lot of people now in Scotland who are interested in this idea, including Scots Nats. The Scots have a much better grip on the land issue than their southern brothers.