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Wednesday, August 17, 2011

SNP Policy on Corporation Tax Conflicting with Their Policy of "Independence in Europe"

  BBC Newsnight Scotland's Gordon Brewer quite often asks perceptive questions, particularly economic ones about Scotland.

  Last night he came up with one for John Swinney about regarding a new paper the Scottish government have produced calling for the power to cut corporation tax.

  He pointed out that Angela Merkel and Nick Sarkozy have just announced an agreement to harmonise their corporation tax rates and that this is almost certainly going to be a prelude to them trying to force CT harmonisation on others, particularly Ireland.
Europe's two most-powerful politicians, German Chancellor Angela Merkel and French President Nicolas Sarkozy, met in Paris to try to ease the euro's slide...

Worryingly for Ireland, they also put the issue of corporation tax back on the table.
They said their two countries were preparing proposals to introduce a common tax on companies from the beginning of 2013.
And while for now it looks like this common tax rate will only apply to France and Germany, the danger is that it could mark the start of a fresh initiative to harmonise the rate that applies to companies in every European economy.
This would be disastrous for the Irish economy, which uses a low rate of corporation tax as a key attraction for multinationals to open new businesses here. ctd

   Brewer pointed out that if that is the case, while Germany/France may not be able to prevent current members of the EU having low CT there is no way they would sign up a new member without fixing that. Cutting CT is pretty well the only policy the SNP have to improve our economy (this being one more than  the others) while being committed to deepening the recession by putting the lights out.

  Yet the SNP are committed to ensuring Scotland, unlike Norway, is an EU member. So Brewer asked them what they would do and Swinney didn't answer.

    But it is a good question.

  What are the options:

1) Negotiate EU membership as a new country, seeking terms slightly different from what the UK has - for example getting some control over our own fishing grounds and having more EU Parliament members (a bonus given to all the small countries). This would mean giving up the control of CT which has been the only economically progressive policy they have.

2) Claim that as part of the previous UK state they already have membership without renegotiation (the reverse of East Germany becoming part of the EU when it united with the West). This would mean keeping the same rights over CT they now have but mean there would be no renegotiation.

3) Scotland quitting the EU while England and Ireland remain inside. This would put us in the same position as Norway and Switzerland, not coincidentally the 2 richest European countries (excluding Luxembourg which is an accounting invention). Both are strongly linked to EU countries both economically (Switzerland is surrounded by the EU) and culturally (Norway used to be united with Sweden) - perhaps not fully matching Scotland's link with England but not that far short either. However much of the reason why independence doesn't scare us, even though it can be a cold world out there, is because it is a wee pretendy independence in which we are not independent of the EU.

    The independence argument just got more complicated, assuming the big pro-union parties are smart enough to notice. In general, because it makes a nonsense of SNP policy it should discourage a separatist vote. On the other hand could UKIP decide that full independence from both Britain and the EU was preferable to remaining part of both? Whatever happens it could lead to a more grown up debate about the real costs and benefits.

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