Published on Nov 17, 2010
An aspect of the financial problems in Ireland which nourishes one of my pet theories is the fact that the Irish government was loathe (at the time of writing) to take an EU bail-out because, amongst other things, it wishes to hold on to its low rate of Corporation Tax, which stands at an enticing 12.5%. Their fear being that once they take the EU money, then France and Germany et al can influence the tax hikes that the beleaguered Irish government would have to introduce. Up goes Corporation Tax and down goes the appeal of Ireland for overseas companies wishing to relocate in a favourable tax regime.
I have long felt (pet theory number 12.5) that artificially low tax rates distort and influence company decision-making and detrimentally affect too many countries.
When I first went to Hong Kong, many years ago now, it was hard (even whilst marvelling at its very bright and buzzy existence) not to think that, but for its low tax regime, it would not be the player that it was. There are numerous other low tax regimes and tax havens that owe, if not their existence, then certainly their prosperity, solely to tax.
What I felt years ago, and still feel, is that established countries, like the UK, France, Germany and the USA should experiment more with low tax areas in their own lands. I know there have been all sorts of experiments with grants and tax reliefs in the UK, but they fall short of the ‘real thing’. So for example, we should have a low rate of corporation tax for companies based in particular regions.
Choosing the favoured areas could be either on the basis of:
Surveys have been carried out recently on this classification. In the first category, that means Liverpool, Nottingham, Glasgow and the Gwent Valleys would be selected.
That might do for a start. If only it were possible to have low tax regimes in those areas for a period of say 10 years, I think it would make a big difference. Why should the tax havens have it all their own way? Liverpool, the new Hong Kong; Nottingham, the new Switzerland; Glasgow, the new Lichtenstein; and the Gwent Valleys, the new Cayman Islands? Why not?
Published on Nov 17, 2010 by Neil Thomas