Belfast Telegraph

Saturday 20 December 2014

Harmonising our taxes with Republic is the way forward

Ed Curran
Ed Curran

Whatever will the Republic think of next that could have a negative impact on Northern Ireland? Imagine VAT on restaurants and hotel bills here was reduced to half that in the Republic.

Imagine our air routes had minimal passenger taxes while, through Dublin airport, you paid 400% more. Imagine petrol and diesel prices up north were at least 10% cheaper than the south.

Imagine businesses here paid only 12.5% corporation tax - less than half the rate in the south. Imagine the Dublin government had bailed out the Northern Ireland economy with a huge loan, but we still had all these goodies in place.

Wouldn't you expect the powers-that-be in the Republic would have something to say about that? They would be champing at the bit with displeasure, complaining to London, Brussels and Washington that the south was the victim of unfair competition from the black north.

The reality is that the shoe is on the other foot. It is we who are losing out to our southern neighbours.

The bailout money has gone from the UK to Dublin, yet the south's VAT bills are reduced from July in southern restaurants and hotels. The airport tax is €3 (£2.70) from Dublin to Britain, but £12 on a single flight from here to Glasgow.

The arguments over whether Northern Ireland should have any reduction in corporation tax - never mind enjoy the Republic's 12.5% rate - are unresolved.

These unpalatable facts crossed my mind last week as I observed the proceedings of the Northern Ireland Affairs Committee inquiring into why air travel to and from Northern Ireland is taxed so heavily.

Any change in this iniquitous tax will still be too late to impact on the pockets of air-travellers this summer, but at least the government in London appears to be listening.

After years of inaction, we now have an open debate involving tourist and hotel interests, local airports, and politicians at Stormont and Westminster.

It will not be enough to simply offer some derogation on the tax on transatlantic flights. Air passenger duty on travel between airports in Britain and here amounts to an unjust indirect tax.

It was wrongly imposed in the first place by a Conservative government and it should be reduced, or phased out, by the current one.

This tax is a legacy of direct rule. It was introduced in 1994 when we were all more interested in whether the IRA ceasefire of that year would hold and whether the peace process would survive. I cannot recall too much - if any - fuss being made either by local politicians, or direct rule ministers.

The new Executive is taking the matter much more seriously now and rightly so. Recently, I heard Arlene Foster, the Trade and Enterprise Minister, offer some interesting tourist statistics. She said visitors to Northern Ireland are worth £500m to the local economy.

A campaign is under way to boost tourism in 2012, when the new £100m Titanic centre opens in Belfast and our greatest attraction, the Giant's Causeway, opens its new visitor centre. That said, it is little wonder that the latest visitor numbers are significantly down. The tax on air travel is an incentive to stay away.

Our direct air link with the United States is threatened with closure because the air passenger duty is a minimum £60 out of Belfast on an economy flight.

Why fly out of Northern Ireland when Dublin airport offers a cheaper alternative? Bailout and near-bankruptcy be damned: the Irish government has abolished duty on transatlantic flights and reduced it to only €3 for domestic flights to Britain.

The fate of Continental Airlines' route to the US may hang in the balance over the £60 tax, but we should be even more concerned about the tax on every domestic traveller on UK routes.

As with corporation tax, the duty on air travel is placing Northern Ireland at a major disadvantage to the Republic. The disparity highlights the need for 'harmonisation' between north and south - a word which once sent alarm bells ringing in the unionist community, but not anymore.

It should be in the interests of the British and Irish governments and the Executive to harmonise obvious disparities which have the effect of damaging Northern Ireland, especially when both governments are committed, through the Good Friday Agreement, to support this community.

Times are changing. We cannot live in isolation of one another, as has been the case for far too long. As we know to our cost, decisions taken in Dublin can have far-reaching and damaging effects on Northern Ireland. More harmonisation is essential.

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