UK Corporation Tax cut a bad sign for Ireland?

summerskin

In the UK budget today it has been announced that Corporation Tax is being cut from 28% to 21% next year, and then down to 20% the year after. This will be the lowest rate in any of the "major" economies of the world.

Is this a bad sign for Ireland? I think so, unfortunately.

For a multi-national like the one I work for, it suddenly makes the UK much more appealing than it was. The lower wages over there have always been attractive (I can employ an office junior there for under £12k, as opposed to €17k here, or a manager that I pay €42k to here, his UK counterpart in our organisation gets £27k) but the tax has been the biggest put-off.

In the half hour since the announcement I've already have 6 emails from our head office asking me to look into the savings we could make by moving our operation to the UK, offsetting them against things such as the remaining lease on our property here and the cost of re-routing all calls internationally to the UK.

I hope it's not as bad as it first appears, there is an excellent workforce in this country, and I know for a fact that our office here outperforms it's UK equivalent at the moment, according to scale.


So, do you think this will have an impact? Positive or negative?

summerskin

Oh Jesus. And now they've abandoned the tax increases on beer, and actually cut the price.


That's it. We're done for.

MidlandsM

get back to your blue sky thinking will you.......

summerskin

I see they've also cut the tax payable by the average family, increasing the tax threshold to £10k, roughly a £700p.a. saving for a family.

Plus 450,000 small businesses will no longer have to pay any form of "jobs tax".

They've decided to not bother balancing their books then?

summerskin

Deleted User wrote: »

They've decided to not bother balancing their books then?

On the contrary, there's a 1% cut in public service spending, with hospitals and schools exempt. More tax to be taken from the Channel Islands and IoM, plus the deficit has fallen from 11.4% of GDP to a forecast of 7.4% this year.

summerskin

summerskin wrote: »

On the contrary, there's a 1% cut in public service spending, with hospitals and schools exempt. More tax to be taken from the Channel Islands and IoM, plus the deficit has fallen from 11.4% of GDP to a forecast of 7.4% this year.

I didn't realise how big Whitehall was for that cut to offset the tax cuts.

summerskin

Deleted User wrote: »

I didn't realise how big Whitehall was for that cut to offset the tax cuts.

Whitehall isn't the only part of the public service. 6m people work in the public service there. More than the population of Ireland....

seamus

Yeah it certainly looks like they gone for the approach where they throw money at the problem and hope that it encourages more money to come back.

I'm not sure if the CT cut is that big a problem for us. Ours is still exceptionally lower and the cost of doing business in Ireland - wages, etc, has dropped, while it has risen in the UK.

Average salaries in Dublin are on a par with those in London, so for services companies there's not that much of a draw for them to move operations to the UK.

I suspect the CT drop is a response to the rate at which the UK are hemorrhaging larger companies to countries like ours, so they're hoping to stem the tide moreso than bring in new companies.

Sergeant

Deleted User wrote: »

They've decided to not bother balancing their books then?

They have the luxury of controlling their own currency. Also, a cut in corporation tax actually had the effect of substantially increasing the tax take when we cut it here in Ireland.

Chop Chop

Our corporate tax is 12.5%, after "legal loopholes" is more like 4%. That's why multinational companies haven't legged it already.

summerskin

seamus wrote: »

Yeah it certainly looks like they gone for the approach where they throw money at the problem and hope that it encourages more money to come back.

I'm not sure if the CT cut is that big a problem for us. Ours is still exceptionally lower and the cost of doing business in Ireland - wages, etc, has dropped, while it has risen in the UK.

Average salaries in Dublin are on a par with those in London, so for services companies there's not that much of a draw for them to move operations to the UK.

I suspect the CT drop is a response to the rate at which the UK are hemorrhaging larger companies to countries like ours, so they're hoping to stem the tide moreso than bring in new companies.

But Dublin wages are far higher than those in Birmingham, Manchester, Glasgow etc. No need to be in London.

Amazon aren't in London, and seem to be doing ok. I can't actually think of any multi-national that has left the UK, outside of the automotive industry. And where exactly are these companies that are flocking to Ireland?

summerskin

[+] Pensions (old age and sickness) £138.1bn
[+] Health Care £125.9bn
[+] Education £34.2bn + £59.1bn (local) total education = £97.2bn
[+] Defence £46.4bn
[+] Social Welfare (income support, unemployment benefits) £117bn
[+] Protection (police, law, courts, fire) £33.4bn
[+] Transport £18.5bn
[+] General Government (e.g. civil service) £17.9bn
[+] Other Spending (mainly local, e.g. waste management, sports and leisure) – £48.6bn
[+] Interest payments on Government debt – £45.1bn
[+] Total Spending £683.bn

is the UK annual spend. Take out the £200bn for health and education, you're left with £450bn, give or take.

1% cut from that is £4.5bn per year. Not bad.

seamus

summerskin wrote: »

But Dublin wages are far higher than those in Birmingham, Manchester, Glasgow etc. No need to be in London.

No, but London contains a quarter of the population of the UK. So for companies who need specially skilled workers - like a lot of technology companies - London is the logical place to be.

If you locate in smaller cities like Manchester or Birmingham you'll have difficulty finding the kind of staff you need. Similar to Ireland.

I can't actually think of any multi-national that has left the UK, outside of the automotive industry. And where exactly are these companies that are flocking to Ireland?

We're home to quite a large amount of HQs of companies, many multinational, who either previously placed in London or who chose Ireland over the UK.

summerskin wrote: »

1% cut from that is £4.5bn per year. Not bad.

It's not great. In Irish terms it would be like a €450m cut instead of the €4bn we've been cutting over the last few years.

Their budget deficit isn't far off ours - hovering around 7% versus our 8.5 - 9%. Granted we have a bigger overall debt burden, but it's pretty clear that a 1% cut in spending is not enough for the UK, especially with all the inflationary measures they've introduced in this budget.

If nothing else, this will be interesting. It's a budget designed to encourage people to spend more money, versus our budgets which have been designed to take more tax. Who knows which will work out better?

summerskin

seamus wrote: »

No, but London contains a quarter of the population of the UK. So for companies who need specially skilled workers - like a lot of technology companies - London is the logical place to be.

If you locate in smaller cities like Manchester or Birmingham you'll have difficulty finding the kind of staff you need. Similar to Ireland.

We're home to quite a large amount of HQs of companies, many multinational, who either previously placed in London or who chose Ireland over the UK.

It's not great. In Irish terms it would be like a €450m cut instead of the €4bn we've been cutting over the last few years.

Their budget deficit isn't far off ours - hovering around 7% versus our 8.5 - 9%. Granted we have a bigger overall debt burden, but it's pretty clear that a 1% cut in spending is not enough for the UK, especially with all the inflationary measures they've introduced.

Utter nonsense. The population that can commute to either of these cities exceeds the total population of Ireland, hardly "small cities". Of course the staff are there. The Birmingham metro area alone has a population of 3,683,000, with manchester having 2,682,500. Neither of those figures include the surrounding commutable areas such as Coventry, Cheshire etc.

London has a population of 8m, plus another 4m who can commute from surrounding areas. So roughly 20% of the UK population. I have lived and worked in both London and Manchester, for multinationals. Funny that.

From your thinking there should be no jobs in any irish city other than Dublin, as the workforce isn't there. Utter drivel.

seamus

summerskin wrote: »

Utter nonsense. The population that can commute to either of these cities exceeds the total population of Ireland, hardly "small cities". Of course the staff are there. The Birmingham metro area alone has a population of 3,683,000, with manchester having 2,682,500. Neither of those figures include the surrounding commutable areas such as Coventry, Cheshire etc.

It's not about actual figures though, it's about proportion. I didn't say these were small cities, nor did I say people couldn't commute, but by and large you will find specialist staff easier in larger cities, and you will find it harder to encourage qualified staff to make a move to a smaller city or to undertake a long commute.

From your thinking there should be no jobs in any irish city other than Dublin, as the workforce isn't there. Utter drivel.

There's a reason why a lot of specialist jobs are located in bigger cities, and less specialist jobs in smaller cities and towns.

You appear to be taking this somewhat personally. I'm just illustrating what companies typically do. There's a reason why companies who need to hire 500 specialist staff in Ireland, typically locate their business in Dublin. There's a reason why Intel chose a location just outside Dublin for a plant which would require 5,000 specialist staff.

Likewise a company who needs 5,000 specialist staff in the UK are more likely to favour London than Manchester simply because it's easier to get that volume of staff in a larger city.

kjl

There is no reason for the multinationals to migrate to UK, unless they say drop the CTR to like 10% I think we are going to be OK.

summerskin

seamus wrote: »

It's not about actual figures though, it's about proportion. I didn't say these were small cities, nor did I say people couldn't commute, but by and large you will find specialist staff easier in larger cities, and you will find it harder to encourage qualified staff to make a move to a smaller city or to undertake a long commute.
There's a reason why a lot of specialist jobs are located in bigger cities, and less specialist jobs in smaller cities and towns.

You appear to be taking this somewhat personally. I'm just illustrating what companies typically do. There's a reason why companies who need to hire 500 specialist staff in Ireland, typically locate their business in Dublin. There's a reason why Intel chose a location just outside Dublin for a plant which would require 5,000 specialist staff.

Likewise a company who needs 5,000 specialist staff in the UK are more likely to favour London than Manchester simply because it's easier to get that volume of staff in a larger city.

My point is that the UK does have large cities. Do you think everyone qualified in IT lives in the south east, for example? Our head office is in the west midlands, not in a city even but a very easily reachable town. We have 600 staff there, plus 1000 dotted across the UK in similar towns. The reason for this is that, as you said, not everyone in the UK wants a long commute, and 80% live outside the London commutable area. Therefore, the rest of the UK makes a good proposition to many companies, such as Amazon, Adidas, and others probably also beginning with the letter A.

A company looking to employ 5000 people simply would not choose London unless it was in finance, as the property would either be 1: too expensive, or 2: simply unavailable.

My company in Ireland, for example, is in the west. We have little or no trouble getting higher end staff to work for us as there are plenty of educated people here, even in some of our highly-specialised sectors. We do struggle for the lower end of jobs as people here seem to expect to be paid €25k for entry level positions.

Sergeant

Sergeant wrote: »

They have the luxury of controlling their own currency. Also, a cut in corporation tax actually had the effect of substantially increasing the tax take when we cut it here in Ireland.

Yeah it does kind of look like they're not happy about getting their inflation back under control so combining some of the current measures with some more money printing should help get it back up.

ScumLord

summerskin wrote: »

But Dublin wages are far higher than those in Birmingham, Manchester, Glasgow etc. No need to be in London.

The difference with Dublin though is that it can easily pull talent from the entire country much easier than you could in the likes of the UK. The UK is just massive compared to Ireland. Commuting through Birmingham isn't exactly easy either, while they have some impressively large transport infrastructure there you have half the country trying to make it through Birmingham at times. Despite the great road network it can take up most of your day getting from one side of Birmingham to the other.

The other thing about those cities is they are notoriously cheap from top to bottom. Every thing seems to be on sale in Birmingham, where as in London they expect to pay more. People want to work in trendy London too, Birmingham isn't all that trendy. Birmingham and the rest of the Midlands are good at certain things. It's well connected with air, rail, sea and roads so there's plenty of transport, logistics and manufacturing up there but I don't think the area has the appeal for IT type businesses.