Monday, October 18, 2010

Even the trade unions can't be wrong all of the time..

I made the case against Northern Ireland getting preferential treatment with regards to Corporation tax here.

I was arguing from an ideological UK Unionist stance, the (deep breath) TUC and the Irish Congress of Trade Unions’ Northern Ireland Committee (ICTUNI) said this week came to the conclusion from an obviously different angle.

They argued cutting Corporation Tax in Northern Ireland would:

1. reduce Government revenues.
2. create a tax loophole for businesses to exploit.
3. not necessarily create any new jobs.
4. have little effect when competing with companies in the Republic as "rules on the taxation of controlled foreign companies and the favourable treatment of dividends and royalties allow many companies to pay far less than the 12.5 per cent headline rate of tax" there.
5. would encourage ‘brass plate’ investment in NI, ie where companies register their name in Northern Ireland for tax purposes without moving staff.
6. would "probably" face a legal challenge from the EU.

Point 1) yes, obviously in the short-term, although the hope/gamble is that in the long-term, a corresponding increase in business profits and turnover would compensate.
Point 2) yes.
Point 3) yes, although with same proviso mentioned with regards to Point 1)
Point 4) yes.
Point 5) yes.
Point 6) yes and if I remember correctly, this is the rationale put forward by the last Labour government against positive discrimination in favour of NI.

You’ll not be surprised that after this (almost unanimous) agreement, my and the ICTUNI’s opinion on the question of lowering corporation taxation generally, on a UK-wide basis diverges... but I think our joint argument, from a Unionist point of view, against a separate lower corporation tax rate operating soley in Northern Ireland's is a sound one.

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