A Place to Stand

the key passage refers to tax. O’Reilly’s view is that the main reason for the Irish economic “miracle” has been the low level of corporate tax in Ireland. He is working to persuade the UK Government to reduce the rate of corporation tax in Northern Ireland to that of the south; that is, from the UK’s 30 per cent to the Republic’s 12.5 per cent. He comments that the Irish miracle is not “because the pubs are great, the golf is great and the climate is, well . . . the fact is, its tax.”

This is, indeed, one of the political truths that politicians ignore at their peril. O’Reilly’s “the fact is, its tax,” is just as valid as Bill Clinton’s “it’s the economy, stupid”. Of course, from the British point of view, there can be no question of cutting the Northern Ireland rate of corporation tax without cutting the UK level. If 12.5 per cent is good for the Republic — and it is — then indeed it would also be good for Northern Ireland. If it would be good for Northern Ireland it would be equally good for England, Wales and Scotland. Not only good, but essential.

Most politicians have little understanding of tax. They think it is easier to tax business because global businesses do not have votes. They do not realise that Ireland has found that lower tax rates produce higher yields. The result is that Conservative tax policies are inadequate, Liberal Democrat policies are self-defeating, and Labour’s are complex and perverse.
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Obviously, a 30 per cent tax rate is less attractive to international business than 12.5 per cent. London has therefore become less attractive than Dublin. Like water running downhill, companies will move from London to Dublin, or to other low-tax countries.

There are numerous alternative locations, and it is impossible to prevent this drift abroad.

// posted by neil craig @ 4:11 pm