Another reason to de-prioritise Corporation Tax reduction in NI…

This blog very often challenges the “apparently obvious”, given that the media and the broad “Commentariat” are inclined to take a straightforward view or prioritise a single aspect of a highly complex subject.

“Corporation Tax” is no different. I have, on numerous occasions, implored the media and the broader “Commentariat” not to forget about a Corporation Tax reduction altogether, but to stop making it their only (or even main) economic priority. Even if, magically, a “Corporation Tax reduction” specifically for NI were to be delivered, it would not alone make up for NI’s appalling skills gap (e.g. the inability of Bombardier to complete a full recruitment process on its original requirements despite a mass of applications), or its infrastructure deficit (e.g. the on-going lack of funding for public transport), or its inherent social parochialism (e.g. its poor linguistic skills) – all of which are fundamental problems which show not a hint of challenge by the “Commentariat” (and therefore by politicians either). So why are we not discussing skills, infrastructure or export orientation? Good things are happening there, but they require far more focus.

I have also written about the political impossibility of delivering a corporation tax reduction specifically to this part of the UK and EU; about the financial improbability of the Executive accepting the full loss in public spending; and about the practical unlikelihood of it appearing high enough up anyone’s agenda in the first place.

There was always another problem which no one really answered – how would you ensure firms locating in NI actually paid the corporation tax they were due to? It turns out, in fact, that this is a problem right across the UK. We were already aware that various financial institutions had become masters of creativity when it came to their own corporation taxes; it turns out some of the largest and best companies in the world – Google, Amazon and Starbucks – also have various deals in place in other countries which mean they pay almost no corporation tax in the UK.

Google is particularly interesting, because it is often quoted as the type of company which may have been attracted to Belfast but ended up in Dublin due to its low corporation taxes. Of course, this is deemed entirely true – its representatives at Parliamentary Committee were perfectly content to claim it. However, the obvious problem is this – why would the UK Government allow one part of the UK to host companies which, by choosing to locate themselves there, could thereby specifically avoid paying corporation tax for its operations in the UK as a whole? Politically and practically, it is just stupid. (Leaving aside the fact that Google essentially doesn’t pay Corporation Tax at all, so in fact the Corporation Tax rate cannot be decisive in its choice of location…)

In other words, the more time goes on, the more the case for a reduction in corporation tax specifically in Northern Ireland unravels – and I say that as someone instinctively supportive of it, on the grounds that it would at least give us a clearly unique offering of some sort to potential investors.

Fixing our economy, and thus enabling job creation here in Northern Ireland, is a complex and difficult task. Some suggest the economy should somehow be “kept out of politics”. On the contrary, economy and society are not distinct things; the type of economy we have impacts on the type of society we have and vice-versa. Thus, the task of sorting out our economy needs to be woven directly into every political and social decision we make.

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3 thoughts on “Another reason to de-prioritise Corporation Tax reduction in NI…

  1. I’ve always been very sceptical about the skills gap, and I don’t think that will change. I believe that there’s a lot more to the Bombardier rejections. Before you condemn the Northern Irish for skills shortages maybe accept the fact that many jobs were filled while some highly specialist jobs could not find an optimum candidate or a candidate they could develop.

    I have degrees in maths and physics (MSci) electronic and electrical engineering (MPhil) and half a year of computer science, some basic Japanese language experience … It was a massive challenge to even get a job interview, because of the issue of experience … And who was offering me any?

    The only experience I could get were completly out of my sphere of study, I would’ve easily settled at being a lab technician or a maths tutor at some point and applied for those as well as every McJob I could that I could afford to get is. I got the impression from some companies that they were only half interested and from others that I was overqualified by having the nerve to try and find a living wage.

    The fact is all I could do was up skill and re skill on the back of family money. I look at places like Graduate Fog and think that I’m not becoming the exception but the rule here. University qualifications are considered far too cheap these days, while their prices are massively going up. I have to ask how can companies who manufacture planes from such raw materials as steel and fibreglass, expect universities to provide final products?

    Are we not in danger of just steering universities into company specific degrees by destroying academic qualifications and academic research that the development of those skills and the development of future skills will be based upon? In the course if asking for political action on high quality skills what respect is given to the Haldane Principles that research bodies (being drastically cut at levels that would make IDS blush) know where is best to spend whatever money is given to them, rather than PPS degree holders with special interests.

    I feel there must be a Nirvana complex among some in the private sector, companies and recruiters who are trapped in that pre-recessionary dogma that an advertisement is enough and that skills on demand were easy to hand? Is begging for more off the state just corporate welfare, a corporate welfare they won’t pay corporation tax upon?

    Demand for skills have rapidly increased, the number of skills needed has also rapidly increased, but the “Supply side” seems to focus entirely with the universities, higher education establishments and training centres, state funded institutions with very little thought among some private sector innovators that it might be possible to invest in the skills supply through sponsorships, through company training programs and that. Workfare was the next big idea, and that went belly up. I would doubt that any employee sorry customer or is that intern or candidate benefited from it, and the markets or rather the bad publicity caused companies to reject it and the government had to make a u-turn on it.

    I agree that there is a supply side problem, and in Northern Ireland the skills supply side has had to rapidly steer itself from an internal process where the state was largely creating and producing the skills for state jobs it itself created to a more external process where they are exporting their graduates into the private sector. I feel though that there is also an adaptation that needs to be made by the private sector, they cannot rely on end products to be supplied by a big state any more, they will have to show the competitiveness and the innovation to look after and develop their own skills health.

    After all Bombardier don’t expect their suppliers to build the airplanes for them, why should they expect their human capital/labour suppliers to come out with engineering skills beyond their company’s ability to improve on them? Surely the companies that take the risk in skills development have a natural advantage and insight over those with the begging bowl out to government.

    • It’s worth noting, in fairness to Bombardier, that they *did* fill the positions locally even though the specific skills they wanted were not available.

      Other firms would simply have looked elsewhere.

  2. Well that’s why they’re successful. Well done to them.

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