Workers’ Party General Secretary, John Lowry, has dismissed renewed calls for the introduction of a lower level of corporation tax in Northern Ireland as at best naive and at worst a deliberate, if doomed, attempt by private business to place an unmanageable burden on the state while earning obscene profits. Mr Lowry’s comments follow a second meeting of the Northern Ireland Affairs Select Committee in
Westminster to discuss the issue on 10th November. There have been long-standing calls in the business community and among all the Stormont Coalition Parties – including Sinn Fein - for the tax rate north of the border to be reduced to 12.5% to match the rate in the South. But CBI (Confederation of British Industry) Northern Ireland chairman Terrence Brannigan told members of the committee that they would support Northern Ireland dropping to a level of 10%., suggesting that dropping to such a level would give Northern Ireland an advantage that would help it overcome decades of economic depression caused by the Troubles.
Mr. Lowry commented that the CBI’s proposal was unworkable and nonsensical. “Recent research published by the Irish Congress of Trades Unions (Pot of Gold or Fools Gold?) clearly shows that all the claims by the CBI are either unworkable or wrong. These people have simply not done their homework.”
“Their main claim is that Northern Ireland could compete with the Republic of Ireland to attract foreign direct investment if it cut its tax rate to 12.5%. But it could only achieve that by introducing as loose an attitude to tax evasion as the Republic of Ireland has done. There is no possibility of Northern Ireland becoming a de facto tax haven within the UK. Their second belief is that Northern Ireland could legally cut its tax rate independently from the UK but EU law would make this so difficult as to be practically impossible. Finally the big mantra of Terrence Brannigan and his acolytes is the idea that Northern Ireland would be economically advantaged by cutting corporation tax. They estimate that this initial cost in terms of lost subsidies for Northern Ireland to match lost tax revenues will be between £200 million a year and (as the Varney report of 2007 suggested) £300 million a year. But they claim that that this is only a short term issue because the tax cut will generate such substantial growth in business activity that the loss in taxes will quickly be made up for by growth in taxes raised from employment."
"This scenario is highly unlikely. To take a small example from Pot of Gold or Fool’s Gold (page 20), if Northern Ireland had a different rate of corporation tax from the rest of the UK, HMRC would have to ensure that prices are not being set with the intention of avoiding tax payments (known as transfer pricing) No supermarket would ever again be able to transfer goods from its GB warehouse to its supermarkets in Northern Ireland without having established a complex procedure to set an “arm’s length price” for the transaction, which is suppose to prevent transfer pricing. The resulting cost for UK business would be considerable. Ultimately this additional cost would have to be reflected in the cost of trading in Northern Ireland. As a result, some companies might simply withdraw from trading in Northern Ireland. In any case, trading with Northern Ireland will become considerably more expensive and who doubts that this will be passed on to the people in terms of higher prices?”
John Lowry claimed that the CBI is out of touch not only with the lives of ordinary people but with reality as we know it. People should not be fooled by crazy plans for lower corporation tax.
Pot of Gold or Fool's Gold? can be dowloaded at http://www.taxresearch.org.uk/Documents/CorpoTaxlores.pdf
Issued: 12th Nov 2010