Who would profit from cut in corporation tax?

21 December 2007

Now that the Varney Review has delivered its predictable verdict, the advocates of the 12.5% corporation tax rate for Northern Ireland, among them the Belfast Telegraph, might be willing to consider the following questions.

Given our very low level of unemployment, where would we find the people to match the avalanche of inward investment which would supposedly be unleashed by a 12.5% tax rate? Our existing private industry requires thousands of migrant workers; would thousands more have to be recruited?

And how can we expect people to move out of the bloated public sector when, as Varney pointed out, they are paid 30% more than in the private sector?

Is it not true that the Ulster Bank and Tesco would be among the largest beneficiaries of a corporation tax cut? Do we really want to enhance the profitability of banks and supermarkets?

Up until five years ago, by which time the Celtic Tiger was already well established, a low corporation tax rate in the Republic was not available to banks, retailers, property developers and the like, who paid 30% corporation tax.

The dual corporation tax system was only ended because of pressure from the EU.

Is it not also true that growing companies, the sort we would wish to attract, never pay an effective tax rate of 30% in the UK because they re-invest a large proportion of their profits?

Has corporation tax proved a deterrent to determined local entrepreneurs like Sir Allan McClay?

Despite the alleged stimulus of low corporation tax, there is disquiet across the border about the weakness of indigenous enterprise and the Irish economy's reliance on foreign investment.

If a 12.5% corporation tax is such an attraction, how many companies have migrated from Northern Ireland across the border to take advantage of it? I have not heard of any.

On the other hand, I read recently of a company closing its operations in Cork and moving them to Northern Ireland.

Convincing answers to these questions might persuade me that the campaign for the 12.5% rate was more than just a desperate, illusory search by local politicians to find a painless way of cutting the public sector.

Business support for a lower corporate tax rate hardly needs explaining.


Robert Ballantine, Moy