Polls showing the Scottish referendum on a dirk-edge have concentrated the minds of those looking to lower corporation tax in the North to 12.5 percent - same as in the South. The current UK rate is 21 percent.
An independent Scotland would be able to reduce the tax to 12.5 percent - or 2.5 percent, for that matter - without need for permission from the Sassanachs - and thus lure investment away from the North.
Of course, it might not be as simple as that. The ScotNats say that after independence they would remain in the EU as its 28th member But there’s no way the other States would allow this if the Scots announced an intention to undercut everybody else as soon as they’d settled in. At that point, the tartan bluffers would back off.
Even so, the renewed urgency about the issue in the North invites another glance at the thinking behind the proposal.
David Cameron says that if the Executive can agree the detail of a 12.5 percent rate with the Treasury, he will push through an act to make it law before parliament dissolves in March 2015.
But the EU has a finger in this pie, too. If corporation tax is reduced here, the shortfall in revenue will have to be met by the Executive - leaving less cash for general expenditure. The EU insists on this arrangement so as to ensure a level playing field across the union. (At least that’s the theory.) The Treasury reckons that slashing the rate would reduce the tax take here by £100 million annually.
Now here’s the thing. Stormont Finance Minister Simon Hamilton estimates that the North will be “fined” £68 million a year by the Treasury if it fails to bring in the welfare reforms (aka “cuts”). On this basis, he’s mad keen on imposing the cuts. We cannot afford to lose that £68 million, he says. Think of the impact on health spending…
But he’s simultaneously all fired up in favour of a measure which would cost us not £68 million but £100 million!
None of it makes sense.
It would be wrong to pick on the DUP only. All five Executive parties are banging the drum for reducing business taxes. They say that the change in corporation tax would generate sufficient new jobs to make up the shortfall. Maybe so. And maybe not. It’s all speculation.
The major factors affecting investment decisions include the state of the world economy, the rhythm of global trade, currency fluctuations etc. - matters over which the NI administration can have no influence. It is because they have no or almost no influence in the matter that local politicians are forever footering about with fantasies about the job-creation potential of cultural festivals, the G8 summit, an Italian bicycle race and so forth.
At the time of the G8 summit last June, we were buried in propaganda about the beauty of the Lakes of Fermanagh enticing major corporations to the county. Almost without exception, the media swallowed and then regurgitated this obvious nonsense.
Today, there is comparable gullibility about new jobs arising from lower corporation tax.
We can say for certain that a reduction to 12.5 percent will put extra millions into the coffers of major companies already operating here - Bombardier, Tesco, Wright Brothers, Atos, etc. Apart from that, nothing can be taken for granted.
Big business would certainly benefit. Small local business - not a lot. The rest of us - probably not at all.
No surprise there.