There are strong indications that in his Budget tomorrow, Chancellor Gideon “George” Osborne will announce that
Northern Ireland will be given responsibility for its corporation tax, thus transforming a region of the UK into a de facto tax-haven. The headline rate of corporation tax may or may not change but there will be loopholes and exemptions which will provide a deregulated economic environment through which money can pass with few questions asked. This de facto tax haven may call itself something like an “enterprise zone” (something which Mitchell McLaughlin in particular has been calling for) but there will be little actual enterprise beyond the shifting and hiding of money. As commentator Nicholas Shaxon says, this accords with “the desire by interests in the City of London to increase the reach of the British web of tax havens around the world, feeding business to the City”.
Although all the parties in the Stormont Coalition seem to see this move as a holy grail, it will do little to bring jobs to Northern Ireland. According to tax expert Richard Murphy to meet EU requirements there would be a need for a separate tax authority for Northern Ireland and a parliament with full taxing powers here. Moreover the EU would need to be convinced this was not done just to change tax rates. And then there would have to be transfer pricing regulations in operation for all GB goods going into and out of NI where there was common ownership on both sides. Indeed, due to these legal issues related to transfer pricing, businesses located in GB may find it so difficult to do business in Northern Ireland that it is not worth their while operating here Moreover, EU law dictates that Stormont must bear the full consequences of varying the corporation tax rate with no intervention or financial aid from central government. As a result, the current subvention from Westminster would fall. As no less a personage than Sammy Wilson has said It would cost us around £300m off our block grant to reduce the business tax from the current 28% to the 12.5% charged in the Republic.
When the “enterprise zone” is announced, the business class will rejoice and they will do so by indicating that after a few years of economic pain – more, that is, than usual – tens of thousands of jobs will come to Northern Ireland. The joy of those who might expect to get their noses in the trough will be real but the jobs, largely, will not. Talking of the low tax rates offered in the Republic Lib Dem Lord Oakeshott called Dublin "Liechtenstein on the Liffey", adding: "If you set out to attract mobile money from around the world, you run much bigger risks when things go wrong." Haven’t our local politicians and their Tory masters learned anything from what happened in the South of this island? The Workers’ Party will have more to say on this issue as events unfold. For the moment the main point to make is that the jobs issue is a charade and that Northern Ireland is about to become a tax-haven, with all the moral and political baggage that comes with it.
Issued: 22nd March 2011