As the FT reports this morning:
Northern Ireland's devolved government faces its biggest overhaul in 15 years as politicians and officials brace for the arrival of long-delayed public spending cuts.
Those cuts are the price Northern Ireland has to pay to introduce the tax competition that its politicians wish for with the Republic of Ireland. I have long warned that this policy is little short of economic madness, and I think I'm about to be proved right.
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So Northern Ireland now wishes to start on the same taxation race-to-the-bottom that the Crown Dependencies engaged in.
Perhaps they might like to consult with the normal, working people of the Isle of Man who are now being taxed until their pips squeak in order to maintain low (4%) tax rates for the wealthy and corporates whilst its government stares into the abyss of bankruptcy.
The working people of the Isle of Man are being taxed until their pips squeak? Doesn’t seem very likely to me.
The UK personal allowance is now £10,000 making it higher than the Isle of Man equivalent at £9,500, but Manx residents pay tax at just 10% on the first £10,500, whereas it is 20% in the UK. After that the income tax rate in the island rises to a maximum of 20%.
Earning surveys suggest the average income in the Isle of Man in 2013 was about £28,600 per year, which would yield tax of about £2,770. The UK equivalent would be about £3,720 and these figures don’t include the fact that NICs are a little lower in the Isle of Man too.
Add to that fully transferable allowances between spouses and a transferable 10% band. A single income married couple could pay just £960 per year in tax whilst a UK resident married couple with single income would pay almost 4 times as much.
I am aware that the 10% band may disappear in April 2016 and be replaced by a £14,000 per year allowance, but I don’t see any pips squeaking.
This was more or less inevitable. Coincidentally I am pleased to see that the SNP have dropped their own plan to cut corporation tax. While this was probably inevitable since Sturgeon took over it will also clearly be politically useful given that Northern Ireland is about to provide a lesson in the effects of this policy.