What would a 12.5% Corporation tax rate in the north mean for the south?

st333ve

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The currency and price of goods and services in northern Ireland mean that workers can be paid much less than the rest of the island without feeling underpaid.

Northern Ireland has a much higher education standard than the rest of the UK and Belfast is becoming a growing IT hub already, attracting a lot of US FDI.
The Universities there are taking advantage of this.

Queen's University Belfast | Press Releases

"A new £7.5 million international research hub, which will bring major advances in computer hard drives, new and improved sensors and a host of advanced coatings, has opened today at Queen’s University Belfast."


Economists have long since been arguing that the automatic adoption of taxation policies from Britain are severely damaging the north's ability to attract FDI and that having a much higher corporation tax rate than the rest of the island practically writes it off as a place for investment.

"Lower corporation tax sees investors head south"

"The Republic’s low rate of corporation tax may have led to 21 international companies setting up there instead of Northern Ireland."

Lower corporation tax sees investors head south - Business News, Business - Belfasttelegraph.co.uk

The Republic of Ireland has been gaining from Northern Ireland's misfortune at having to adopt unsuitable UK economic policy.

Therefore it is safe to conclude that with all things considered the north actually has stagnant potential that is being wasted.
The region is therefore finding itself with no other option than to depend on a subsidy from Britain as a replacement for being able to create it's own successful economy

The extent to the north's potential has been raised by senior economists, accountants and business leaders who have concluded that dropping the rate of corporation tax would create an immense amount of employment, at least 90,000 new jobs.

Tax cut 'could create 90,000 jobs' - National News, Breaking News - Enniscourthyguardian.ie

Dropping the rate of corporation tax has been supported by ALL main political parties in the north but has been constantly rejected by the British government.

However there are signs that things might be changing.

Shadow Northern Ireland secretary Owen Paterson welcomed the report, saying: "They make a very coherent case for a reduced rate of corporation tax in Northern Ireland."

With the completion of the Titanic Quarter and a possible levelling of corporation tax across the island, what would this mean for the south considering the fact that the higher rate of corporation tax has been sending FDI south?

Could the north become a real danger to the Republics Economy in the future and attract investment away from the south, considering the north has a highly educated low paid workforce which could appeal more to the pockets of business investors?

Is the potential for an emerging economy in the north a threat or will it have a positive knock on effect?

 
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reknaw

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It might divert some FDI from here for sure, but I don't think it will happen.

Dropping the rate of corporation tax has been supported by ALL main political parties in the north but has been constantly rejected by the British government.
I can't see Westminster going for it, because the Scots (at least) would most likely want to do the same.
 

st333ve

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Different government this time around remember, and they have shown interest in this.
Labour flat out rejected it, it remains to be rejected by the Tory's who seem to actually be leaning towards favouring it.

It's a disgrace that the 100% mandate from political parties and support for this from the business leaders and economists has been flippantly disregarded so easily in the past.
This does expose the true lack of powers the Stormont council actually has.

It's true that the real reason behind the opposition could actually have more to do with Scotland than here, allowing more control over economic powers here and a successful impact could be just the right kind of economic evidence Scottish Nationalists need to push for independence and it could make a huge difference to their cause - Something a pro-Union British government would obviously never want.
 
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Tigris Celtica

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I think it would mean Armageddon for FDI in the republic. Foreign investors are already being driven away by our ridiculously high costs.
 

SinnShane

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Hyper capitalism must die. Higher rates of corporation tax is one of the weapons to kill it.
 

st333ve

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If they do it they'll do it for all of the UK as well as NI.
I don't think so.
Lower England can still attract massive investment and the government will not want to lose the large revenue from corporation tax , especially when it sees no reason for lowering it in England.

Also the unsuitable economic policies here which hamper the economy, send the more educated students from here to England via the 'brain drain'.

It might suit Britain to hand out a subsidy here instead, at the expense of our wider society.
 

factual

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Remember that corp tax is only one of a range of things.

The average standard of education is much better in the 26 counties and that is more important.

The 6 counties have low educational outturns, on average, and it will take decades to reverse that!
 

ExpatObserver

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I don't think so.
Lower England can still attract massive investment and the government will not want to lose the large revenue from corporation tax , especially when it sees no reason for lowering it in England.
Interesting thread!

Heathrow and the City offer compelling reasons in and of themselves for FDI south of the Wash. The North needs some incentive additional to its low cost base to generate much greater private sector activity. This can be done through grants etc (as has been the case for years) or reduced taxation.

Personally, I believe there will be a lower rate in the North than rest of UK. I believe the objective is to compete with ROI for FDI and not the rest of the UK.
 

st333ve

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Remember that corp tax is only one of a range of things.

The average standard of education is much better in the 26 counties and that is more important.

The 6 counties have low educational outturns, on average, and it will take decades to reverse that!
Totally untrue.

Please provide details.

I believe you are speaking from your own stereotype and not fact.

With the different examinations I am unaware if the north has a higer education standard then the south, that's why I stated it has a high education standard which it certainly does....

"Record breaking results"

Northern Ireland's students are still the best G.C.S.E performers, with 75.1% of entries gaining A* to C grades and 27.1% gaining As or A*s.
http://news.bbc.co.uk/1/hi/education/8223855.stm

"NI pupils tops UK for A-levels "
http://news.bbc.co.uk/1/hi/northern_ireland/3148785.stm

http://www.belfasttelegraph.co.uk/news/education/northern-irelands-universities-world-leading-14113016.html
Northern Ireland's universities 'world leading'

I seriously doubt that education would stand in the way of investment if Corp tax was reduced.
As many professional economists have stated, it is simple mathematics.
Businesses go where they can maximise profit, the south is cheaper it's that simple.
If the south lost this advantage then it could very well lose a lot of FDI.
 
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johnfás

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Combined with the high costs of doing business in the Republic, and the ease with which one can now move from Dublin to Belfast, it would be extremely detrimental. The only competitive advantage which the Republic would retain is the fact that it remains in the Euro. Irrespective of one's position on the Euro, it is a consideration of many foreign direct investors as it gives them currency options on their European profits.
 

ExpatObserver

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Remember that corp tax is only one of a range of things.

The average standard of education is much better in the 26 counties and that is more important.

The 6 counties have low educational outturns, on average, and it will take decades to reverse that!
Thanks; interesting view. I am a keen observer of this stuff, especially education; can you let me/us know the source of these facts?
 

ExpatObserver

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Combined with the high costs of doing business in the Republic, and the ease with which one can now move from Dublin to Belfast, it would be extremely detrimental. The only competitive advantage which the Republic would retain is the fact that it remains in the Euro. Irrespective of one's position on the Euro, it is a consideration of many foreign direct investors as it gives them currency options on their European profits.
That's a very good point
 

st333ve

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If a company uses the Euro, I believe the weaker Sterling in the north means that when converted they would pay their workforce much less possibly making the north MORE attractive.
 

johnfás

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If a company uses the Euro, I believe the weaker Sterling means that it would pay its workforce much less actually making the north MORE attractive.
Yes, but if they want to keep their profits in Euro they can't move them to the UK so easily. The current position of Sterling is not likely to result in major investments by FDI in Northern Ireland owing to the fact that currencies fluctuate and the average investor would be taking a view of beyond a decade, let alone a year. What it does benefit is players already in the market as it makes their exports more competitive and (hopefully if you live there) increase employment.

However, as I said above, leaving currency issues aside, the average cost of a worker remains much lower in the North than in the Republic. This, alongside the tax advantage, would be a major draw for FDI.
 

Oriel27

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Yes, but if they want to keep their profits in Euro they can't move them to the UK so easily. The current position of Sterling is not likely to result in major investments by FDI in Northern Ireland owing to the fact that currencies fluctuate and the average investor would be taking a view of beyond a decade, let alone a year. What it does benefit is players already in the market as it makes their exports more competitive and (hopefully if you live there) increase employment.

However, as I said above, leaving currency issues aside, the average cost of a worker remains much lower in the North than in the Republic. This, alongside the tax advantage, would be a major draw for FDI.
I hear from a reliable source in Monaghan County Council, out of 9 contracts the council have on the go, 8 .5 of them are being completed by northern companys. the 1 southern company that has half of a contract (present paving work in monaghan town) is not making a penny on the work.
 

st333ve

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The lower wages makes all the difference.

I think southern border counties will be hit very hard if the corp tax rate drops in the north.

They're already getting hit hard.

When a line is crossed that makes the north a more attractive place to invest than the south, we could see political ramifications.
 

Scipio

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The lower wages makes all the difference.

I think southern border counties will be hit very hard if the corp tax rate drops in the north.

They're already getting hit hard.

When a line is crossed that makes the north a more attractive place to invest than the south, we could see political ramifications.
This has already been discussed here.

It has no realistic chance of happening, for a multitude of reasons.
 

Sync

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We'd still have the euro, and a lower risk of terrorism, but it would have a damaging impact. As mentioned though, it's not a runner at all.

NI gets enough from the Union financially that Wales, England and Scotland are hardly going to be happy about giving companies who DO want to deal in sterling a reason to go to NI rather than their own areas.
 

st333ve

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NI gets enough from the Union financially .
I really dislike this attitude.

We are obviously undemocratically totally blocked from creating our own economy and people continue to point at the north and claim we're lucky to be getting a subsidy?

The subsidy is in replace of an economy, this is certainly not a situation to be thankful for.
If the British government overrule our 100% mandate and persistently deny us an economy then it's their fault we need a subsidy.
Not one person here should feel in anyway grateful, nothing will replace economic stability and growth for the people here.

90,000+ jobs is a huge thing to prevent, the British government have been doing this.

We don't "get enough" from them, we get so much taken away from us and the bare necessity are thrown back as we're told to be grateful.

A highly educated region like this does not deserve to have the basket case economy it has been lumbered with, we know how to get out of it - the British government know yet it is they who are preventing it.
 
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