I know this post will probably go on deaf ears but what the heck, nothing ventured nothing gained.
We know the corporation tax cut decision for Northern Ireland is on the back burner until the back end of 2014. There’s still one question bugging me, who would actually benefit from an 8% reduction in corp tax?
How many NI companies have a profit < £300,000 20% to 12% would save 24K per company assuming they were all in profit of £300K.
My rationale is this, I don’t there are that many companies that would benefit. And certainly not in the current climate. Though the companies do save some much needed money to carry into the next year the usual tactic for reducing the corporation tax bill is to buy assets in the last quarter to reduce the bill down to zero, probably the most obvious accounting concept that’s taught, minimise the tax you pay at year end.
At this point a 8% cut makes no difference to anyone but it looks good in the papers though.
Also a corporation tax cut doesn’t encourage spending within the consumers pockets. There’s no real benefit passed on to them. Merely an observation not a complaint.
UK Gov PLC can toy with the idea of a corp tax cut as the impact is fairly minimal. If you were to suggest a NI specific VAT cut to 12.5% or a reduction in income tax (albeit by a couple of % points) I personally think you’d see a huge difference in the general consumer outlook and in local high street spending. Though UK Gov PLC would never consider this as the wider implication is that if it can happen in NI then it can happen across the UK in general.
I don’t know facts and figures from the #backinbelfast marketing push, I’ve heard figures bandied about but no data in a concrete form. For all the TV advertising and harping on social media did it actually help? We still see the news articles of a pub chain closing, because they were closing all along for the simple reason was the consumer couldn’t actually afford to go out. #backinbelfast could be considered the biggest sticking plaster for the hospitality industry, perhaps.
Am I an economist? No. Am I an accountant? Not quite (but I am qualified partially). Do I care? You betcha. And I know I’m not the only one who cares. The thing is it seems the tenacity of my fellow brethren (and sisteren) have banged their collective heads against the wall for too long.
So when folk normally get to this point it’s where the most creative, radical and exciting thinking comes out. It’s worth looking at the likes of Sir John Cowperthwaite who was financial secretary for Hong Kong 1961-1971. The result was turning Hong Kong from one of the poorest output countries to one of the highest. He used to, allegedly, sleep with a copy of Adam Smith’s “Wealth of Nations” beside him. The main aims at the time were to make starting up easy with low barriers of cost, red tape and so on. Also lower taxes to encourage spending….
For Northern Ireland I believe we need similar, it has to benefit both sides, the companies and the consumers.