Cutting corporation tax: ‘Fools Gold’ economics

FatCat_big19The Stormont politicians are patting themselves on the back for securing the right to corporation tax by 2017. They boast of the jobs and investment they claim it will bring. They are much quieter when it comes to explaining its effect on public services.

Due to EU rules, any cut in corporation tax will have to balances with a cut Stormont’s block grant. If a company moves its base from Britain to take advantage of the lower corporation tax, then the UK Treasury must be reimbursed for the loss in its revenue. In other words, for every pound these companies gain in extra profits, a pound is lost to public services.

The approach of the Assembly Executive is to engage in a race to the bottom in terms of taxing big business. Arlene Foster commented that corporation tax should be set at 10% in order to compete with the South, but the real effective rate of tax paid by big business across the border is closer to 2 or 3%. Google, for example, pays an effective tax rate of 0.25%!

The Department of Enterprise, Trade and Investment claims that a cut incorporation tax will create 50,000 new jobs. A great headline – but it won’t be until 2037, according to their own figures! It is likely this figure is massively exaggerated. Across Europe, big business is hoarding profits rather than investing, nervous about the extremely unstable economic situation. Internationally, this figure amount to almost £2 trillion!

Those jobs which have been attracted to Northern Ireland in recent years through hand-outs to big business have overwhelmingly been low-paid and precarious. So, the politicians have agreed to destroy tens of thousands of relatively wellpaid, secure public sector jobs in the vague hope that this will be compensated for by poorer quality, private sector jobs in the future!

A corporation tax cut wouldn’t even save jobs currently being lost due to capitalist globalisation. When tobacco firm Gallagher’s – a profitable company – decided to shift production to Poland, they were asked by the trade unions if lower corporation tax would have enticed them to say. Their response: they hadn’t even considered it!

All the Stormont Parties are signed up to this neo-liberal myth of “rebalancing the economy” in order to allow space for the private sector to grow. The Socialist Party is in favour of “rebalancing the economy”, not towards the fat cats but in the interests of workers and young people. We cannot afford to pander to big business’s demands for ever greater profits. Instead, we demand these corporations are brought into public ownership and the wealth they horde – which is created by the working class – is used in a democratic plan to create social useful jobs with a living wage for all.

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