Referendum : Corporation Tax Cut Consequences
20 March 2014
If Scotland were to vote to leave the UK in the Referendum in September then it would have disruptive consequences for the economic relationship between Scotland and the individual countries that would then make up the rest of the UK – rUK.
This is particularly so because the Referendum is taking place against a backdrop of stagnant living standards for the many as the economy continues to grow at a low rate.
Take for example, Northern Ireland.
The Northern Ireland Assembly by the Northern Ireland Centre for Economic Policy were advised last October on the condition of its economy: "Forecasts suggest that Northern Ireland is beginning its road to recovery. It is a very long road. I have often likened it to falling off a cliff and climbing back up the stairs; it takes a long time to get back to where you started. Therefore, it will be a very slow recovery — very fragile and tentative.”
There is the question of the level of corporation tax on business.
A decision has yet to be taken on whether or not the UK government will transfer the power to set the level of corporation tax in Northern Ireland to the Northern Ireland Assembly.
If an independent Scotland had an SNP government pledged to cut corporation tax to 3 per cent less than the UK rate, the NI Assembly might find itself bordering two countries (Scotland and the Irish Republic) with lower corporation tax rates than itself.
As the Belfast Telegraph observed :
“That would leave Northern Ireland surrounded by countries with lower corporation tax rates than it, which could cause potentially substantial damage to business in the province.”
A race to the bottom could then ensue on cutting tax rates with all of its grim consequences for businesses in Northern Ireland and for public spending.
The Referendum on the future of Scotland is for people in Scotland to decide.
A “Yes” vote might lead toa referendum in Northern Ireland , England and Wales on whether there should be a currency union between the rest of the UK and Scotland.
Alex Salmond opposes such a referendum.
But that would be for the people of the rUk to decide, particularly if economic recovery is in a state of fragility.