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.