That's the good news.
Now for the band news.
The UK government has agreed to devolve corporation tax powers to Stormont from April 2017.
I've said it before, many times, and in many places that this will be a disaster for Northern Ireland because of the way EU law will apply to any cut in the tax rate, which means the UK block grant to Northern Ireland has to be cut by the amount that the tax cut will cost from the moment it is introduced with absolutely no guarantee at all that it will bring in a penny of additional revenue to make good the loss. That means the case for this cut is based on dogma, foolhardy belief and the spin put out by KPMG Belfast rather than any economic case. That means this will be a disaster for the people of Northern Ireland.
But it will be a disaster for all the rest of us in the UK too. Scotland was deliberately not given devolved corporation tax powers by the Smith Commission to prevent a race to the bottom on this tax where regions of the UK compete to reduce their corporation tax rate to attract jobs at an overall cost far in excess of any net benefit to the country as a whole, and with a resulting shift in the tax burden to ordinary people that can only massively increase inequality to add to the problems we face as a consequence.
Scotland is now bound to demand corporation tax powers.
And then Wales.
And then the 'Northern Powerhouse'.
And before long the Isle of Wight will want to be an offshore finance centre (don't mock: its bigger than most of them).
This is the path to the breakdown of integrated tax, failed macroeconomic policy, fractured industrial strategies, ineffective fiscal policy and regional and national inequalities that will increase social tensions as well as undermine the national economy.
I will continue to argue against this madness and will hope that a new government will overturn this madness, but with a hung parliament that would be unlikely. This was not a Christmas present I wanted, and it is one the country will live to regret.
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I’d been told by a very reliable source that the corporation tax change was a ‘done deal’, Richard, so I’m not surprised. And it does, of course, now provide the mechanism for the all out race to the bottom on corporate taxation that the Tories have been pursuing in one form of another since they came to power. Indeed, as you point out here, it may well also prove the catalyst for much more besides.
Cameron and co and their many corporate paymasters have delivered an excellent Xmas present for the 1%, and the NI government have walked slap bang into a policy that will prove a disaster. We can only hope an incoming Labour government (assuming there is one) overturns this policy. At least they have time to do it.
I fear they won’t: in a hung parliament no one will want to upset Northern Ireland and I am afraid all politicians there have bought KPMG’s rhetoric on this issue
Deeply worrying
Not all politicians, Richard. The Green Party in Northern Ireland has argued against the devolution of corporation tax since the idea was floated. Here’s a link to Belfast City Councillor Ross Brown’s take on the matter: http://voterossbrown.eu/arguments-against-lower-corporation-tax-for-n-ireland/
I was not aware
I am encouraged! Greatly
So much for tax harmonisation! This is going on my blog soon
Labour`s vague promises on closing a few tax “loopholes” and collecting an extra few hundred million, have not proved themselves vote-winners, but all is not necessarily lost; there is still time for policies to be improved.
Does anyone really believe this Tory-led government really wants to get rid of the scourge of tax avoidance, which Margaret Hodge has described as now being an “industry” in this country. A recent poll surprised us, not with its findings that only one in five of the electorate believes political parties have done enough to ensure companies and rich individuals pay their fair share, but that 20% of voters actually think sufficient is being done! It`s difficult to see where there is any evidence to suggest the government is serious in its intent, despite the rhetoric about avoidance being “morally repugnant”, and that all tax avoiding companies like Amazon and Starbucks would soon be “smelling the coffee”.
In fact, there is plenty of evidence supporting the opposite thesis, that this government has never taken the subject seriously, despite Osborne`s announcement about a so-called “Google tax”, which is designed to be benefitting the Treasury by only £355m a year by 2019, barely denting the current “tax gap” of at least £35bn. The most obvious evidence is the fact that thousands of jobs have been cut, with more to come should disaster befall us and the Tories form a government next May, at HMRC. How can it possibly make sense to reduce the number of tax inspectors when supposedly trying to collect more tax? No logic either in allowing the government`s tax agency to make “sweetheart deals” with companies like Vodaphone and Starbucks, excusing them from billions owed in tax bills. Similarly, Cameron and Osborne can hardly complain about the creation of “aggressive tax structures” as have recently been uncovered in Luxembourg, by the “big four” group of accounting firms when their government uses advice from those same firms for tax policy. Such advice led to the adoption of the “patent box” device to encourage firms to invest in Britain, as opposed to other EU countries, because this particular scam could see firms paying as little as 5% in corporation tax on their vast profits. Interestingly, Osborne has been forced to amend this recently because of German opposition. Quite clearly, countries in the EU are getting fed up with what John Cridland, the director-general of Britain`s business organisation the CBI, called Britain “going it alone”, at a time when the finance ministers of Germany, France and Italy are stressing that the “lack of tax harmonisation is one of the main causes allowing aggressive tax planning”. In other words, until all countries in the EU work together, their Treasuries will continue to be deprived of billions.
This need for co-operation did not deter the coalition government from relaxing the so-called “controlled foreign companies” laws, another scam for the world`s unprincipled companies to exploit, or from its recent announcement in the autumn statement that Northern Ireland would be allowed to set its own level of corporation tax, presumably as low as 12.5% to match that of the Republic. After all, who cares about “tax harmonisation” when support from Unionists might be needed in May for another Tory coalition? Even if this obviously provocative action by Osborne is not deemed illegal regional aid, as tax expert Richard Murphy believes, does the government expect other EU countries to sit back and watch quietly as businesses up sticks and move their headquarters to Belfast? Relations with the US have hardly improved with the government`s reduction of corporation tax rates to 21%, fully 18 points lower than those in the States, leading to senators threatening legislation preventing take-overs of foreign companies for tax reasons, the so-called tax “inversion” deals.
So what should a Labour party, with hopes of forming a government in six months time, be advocating? Supporting “tax harmonisation” might be a good start, as clearly the huge variation in Europe`s corporate tax levels invites trouble from the “big four” and their clients. Only when all EU members co-operate fully, agree tactics, and avoid “advice” from the “big four” accounting firms, will tax avoidance be reduced.Then there`s the possibility of a Business Rate Supplement, for tax avoiding companies, as well as the adoption of the Fair Tax Mark as a government award for firms actually managing to pay the correct amount, and a firm commitment that any tax avoiding individual, or boss/director/CEO/ of any tax avoiding business will return all Honours, and be in receipt of none in the future.
By stressing such specific proposals, Labour would at least be demonstrating to the electorate not only that they are serious in their intent to reduce the “tax gap”, but that they really are different from the other parties. Forcing individuals and corporations to pay up would mean policies would change, and reasons for austerity disappear, something the voters are desperate to hear.
Do you advocate a single global taxation system?
If not, given that countries can differ, why not recognise that with inequality (which occurs and exists for a wide range of reasons) regions can differ too?
I advocate cooperation in tax
Tax competition assumes failure is acceptable, as all competition does
I do not think failed tax systems acceptable
Maybe you do, but if so you advocate tax war, not tax competition
Richard
I may post this on a few threads, sorry to seem pushy, but there is a truly astonishing article in the DT from Charles Moore on Boxing Day. Starting from an unfortunate incident in which his wife & dog had both been hurt he posits the idea of a National Health Service for Animals, immediately dismisses it as absurd, & then goes on to propound on how absurd & wasteful it is to have a National Health Service at all.
Moore doesn’t, regrettably, fully follow through this idea & will, no doubt, say that this was because of space, although he had space to go into quite unnecessary detail about his wife’s efforts to free the dog & his efforts to assist her. The clear intimation, however, was that its the natural way of things with animals that, when they become injured or sick, its kinder & a whole lot cheaper, to have them put down, &, likewise, when the proletariat become injured or sick, its kinder & a whole lot cheaper, to have them put down.
I mean, I read it about 4 times & if it was meant to be ironic that passed me by! I had to laugh in sheer horror. I have a horrible feeling that Charles Moore wasn’t being remotely ironic. One can imagine him passing the port to Osborne & assuring him, “30% is absurdly high, decent people won’t need the state & indecent ones don’t deserve it!”
Back in the 1900s, when the first grammar schools were introduced, a high lord wrote indignantly, probably to the Telegraph, of the sheer injustice of his being required by law to pay tax
“to educate the children of the working classes so that they may compete for jobs with my children!”
It is a funny (strange rather than hilarious) thing that 100 years on, Charles Moore, as editor of a daily paper, can be still evincing the same views.