My company Ultonia Communications’ analysis of the Corporation Tax Bill appears here.
The Corporation Tax (Northern Ireland) Bill was published last week, outlining the transfer of powers to the Northern Ireland Assembly for the setting of a Northern Ireland Rate of profits tax in some circumstances.
For such a vast and important change, it has received scant media attention. Being a serious economic and political matter, there has been almost no independent commentary on the issue at all and, insofar as there has, it has consisted of the standard Unions versus Businesses debate.
There are a number of essential points which should by now have been clarified:
- the Bill does not set the Northern Ireland Rate of Corporation Tax at 12.5% (or anything else), it merely transfers the power to do so to the Northern Ireland Assembly (which could even set it at nil, if it wished);
- the Bill is absolutely not about “tax cuts for big business” (its predominant focus is SMEs); and
- any reduced rate would apply only to profits attributable to people employed and work carried out in Northern Ireland.
However, the biggest failing in the analysis so far has been on the overall politics of the Bill – and not just as it applies to Northern Ireland. Indeed, I would go so far as to say the Bill is clearly written for Scotland, not Northern Ireland.
The most obvious hint of this is in the list of “excluded industries” (also referred to as “non-qualifying”), i.e. the industries which would not qualify to pay the (presumably reduced) Northern Ireland rate. The list is fairly long but can be summarised broadly as just two – finance and oil/gas. These just happen to be Scotland’s two biggest industries.
The intention is clear. The first objective is to limit the prospect of Scotland wanting the same powers as Northern Ireland by ensuring Northern Ireland does not get an advantage in Scotland’s key industries. The second is to ensure that, if the politics force the same arrangement to be made for Scotland, finance and oil revenues to the UK Treasury nevertheless remain secure.
Implicit to the Bill, therefore, is that it accepts the risk that Scotland may want and get the same powers soon. This risk must also be applied to the economic models of the benefit of reducing the Northern Ireland Rate of Profits Tax within the terms of the Bill. This essential point must not be missed, as discussion of the Bill is close to pointless without it.