Written evidence from Peninsula Hi-Tech
Ltd
1. What effect will the reduction of corporation
tax rate on a UK wide basis announced in the June 2010 Budget
have on the competitiveness of the Northern Ireland economy?
None. About as useful
as "throwing snowballs into Hell". The failed
economy of N.Ireland does not allow many companies here in N.Ireland
the luxury of benefiting from the proposed reduction from 28%
to 24%? (Over four year time scale). The Inland Revenue returns
for N.Ireland prove this statement to be correct.
2. What would be the benefits of equalizing
the corporation tax rate in Northern Ireland with that of the
Republic of Ireland?
Immense. The Republic
of Ireland with 10% corporation tax up to 2003 and now 12.5% is
the most successful country in the EU as a location for foreign
direct investment (FDI) across all sectors. The South has nine
of the worlds 10 top software companies.
Eight of the worlds 10 top pharmaceutical companies.
Of the top 50 banks worldwide more than half have presence here
tax incentived through low corporation and other finance favourable
legislation creating international business in Dublin and many
other locations throughout the South since early 90's.
The Industrial Development Agency (IDA) report stated
in 2009 140,000 people in direct employment in over 600 IDA supported
multi-national corporations in a small country of 4.0 million
people. Not even the UK with 61 million on a like for like population
basis matches this record. Foreign multi-national companies provide
indirect employment for a further 240,000, incur €19 billion
in direct expenditure and pay €7 billion in payroll tax.
Corporation tax income receipted to the exchequer provides 50%
of all corporate taxes.
Despite the worst recession since the Wall Street
crash in 1929 existing hi-tech companies have announced expansion
plans ie Google, Facebook, McAfee, Telefonica, AXA, Zurich Group
relocating their headquarters to Dublin as well as many other
companies and see Ireland as a first choice location when seeking
to expand.
The Department of Finance in Dublin have enacted
tax incentives for research and development (R&D), Intellectual
Property (IP) management centres. FDI projects rank Ireland as
No.1 for FDI jobs per capita in 2009 according to IBM Global locations.
Price Waterhouse Coopers accountants to major international
companies worldwide have ranked the Republic of Ireland as first
in Europe for lowest tax rates since 2007 each year their paying
taxes report places Ireland as the lowest tax region. It is not
possible to compete with the South in this unfair and tax skewed
market place where 20% of the land mass of Ireland remains behind
"economic iron curtain" maintained by the South.
I have been aware of this for decades and have written to the
Irish Government and spoken to the IDA since 1989 that I as the
first private sector builder of new technology infrastructure
in Northern Ireland could not ever compete with the South for
American FDI companies. I have had meetings with the IDA and enclose
copies of my letters to the Irish Government and Senior DETI and
IDA personnel. I am fully aware of the stranglehold the South
has and will continue to hold with the distorted tax advantages
that has left the Ulster Science & Technology Park buildings
www.ulstersciencepark.com vacant for more than 50% of the time
over the last 20 years.
The Assistant Secretary of DETI in Dublin has accepted
in his reply to me that the Ulster Science and Technology Park
on the Buncrana Road in Derry located 20 miles from the Letterkenny
IDA Business and Technology Park has benefited and created more
jobs in an isolated town of 14,000 population and competes more
successfully than a city of 110,000 population with lower cost
base and higher unemployment population. "The major selling
point for IDA Ireland in seeking to attract inward investment
is the 12.5% rate of corporation tax in the South". Extract
from Department of Enterprise Trade and Innovation letter to me
from Assistant Secretary Brian Whitney. He also states that "the
situation encountered by me in running the Ulster Science &
Technology Park (USTP) given that it operates in close proximity
to the IDA Business and Technology Park in Letterkenny may provide
a particularly powerful example to illustrate the difficulties
created for me by the different corporate taxation regimes in
any further discussion on this matter with the British Government".
I have the letters of reply to prove my case that
the South's taxation advantaged policies is a curse to commerce
and job creation here in Northern Ireland. The Irish Republic's
success as the fifth freest economy on the world (2010 index of
economic freedom) does not apply to the one-third population of
the island of Ireland and the 20% land mass that Northern Ireland
encompasses. (Area 12,121sq/km or 5,452sq.miles Rep of Ireland
Area 70,282sq.km or 27,136.59 sq. miles)
The Irish Republic with its 80% land mass 4.0 million
population without the 30 years of desolation and destruction
suffered by the North continues to advance despite the recession
as the PWC 2010 CEO Pulse Report Survey states that 40% of CEO's
of multinational companies with Irish operations are considering
making additional investment increase of 25% in 2009. The people
of Northern Ireland cannot continue to pay reparation through
unemployment and its attendant ills. The need to have a 5% corporation
tax for at least the next 10 years to help undo the harm that
30 years of violence and its withered legacy has left.
Northern Ireland as a sterling region would enhance
the United Kingdoms' role in attracting major pharmaceutical/Biotechnology
companies that the republic has had a monopoly on for decades.
The need to change the unproductive policies that have been civil
service driven since the troubles began must be changed, we have
a failed economy and a fragile peace that requires a private sector
focused job creating onus to increase productivity.
3. What alternative measures could be introduced
by the UK Government to make the NI economy more competitive?
Reduce the size of the public sector. This will reduce
the cost of servicing the debt burden of taxation that occurs
with too many in sheltered employment seeking low risk livelihoods
with little productive effort. The policies of the past have resulted
in too many Government departments regulating and revenue seeking
to justify their roles. The evidence is all around you to see
"taxing vacant properties in pot-holed streets that have
not seen a barrel of bitmac in 40 years". Planning departments
that are so dysfunctional and unable to discharge their duties
that one has to believe the system is actually delinquent in the
time span that it takes to renew/replace what was already the
beneficiary of planning approval decades past. The public sector
is unquestionably a blight to commerce in Northern Ireland and
I have first hand knowledge of this fact.
4. Is a reduction in corporation tax the simplest
and quickest way to make the NI economy more competitive and how
long would it be before Northern Ireland realised the benefits?
Yes. On both counts I
say yes. FDI multi-nationals are already located in the South
the proven template of success exists across the border. The South
is 1st for FDI jobs per capita 1st for FDI and corporate tax,
2nd lowest total tax rate in EU make Northern Ireland the lowest
with 5% corporation tax to year 2020 to rebalance and undo the
harm of 40 years of manufacturing loss and decline and 30 years
of violence. The Irish Republic is the 3rd most globalised nation
in the world, only Singapore and Hong Kong are ahead. It is immediate
and cost effective and will utilise the wasted talents of the
unemployed and the assets of the under-utilised infrastructure
already in place, ie good housing, good schools, telecommunications
and buildings. Peninsula has more that 300,000sq.ft. of high quality
vacant employment creating infrastructure in Derry for years.
There is no tax return to revenue when thousands who should be
working at the Ulster Science and Technology Park have no jobs.
The buildings are lying vacant, non-income producing except for
Land & Property Rates division seeking rates of thousands
of pounds on vacant high quality computer designed buildings specifically
and solely pioneered by Peninsula since 1989 to measure out a
share in the community creating work with the digital block by
first building with the concrete block.
5. What are the legal barriers to the introduction
of different corporation tax rates on a regional basis within
the UK?
None. All secular laws
are manmade and can be altered, amended or abolished, no other
region in the UK has a land frontier where the dominant role of
the Irish Governments protectionist policies and low corporation
tax this hinders FDI investment from looking at the whole island
for investment and job creation. No other region of the UK has
had to endure 30 years of lost opportunities due to civil unrest.
The newer EU countries that have recently joined
have cost and tax advantages that the EU recognise as a necessary
lever to bring income levels to the norm in the EU. This fair
and equitable policy will have the support of the EU. In fact
the reality is unjust and unfair for the UK Government and the
Irish Government as members of the EU to be advocates and implementers
of a one island economy through equality of tax policies.
6. What would be the effect of reduced tax
revenue in Northern Ireland?
A failed economy which I have worked in for more
than 30 years is not a tax generating economy Northern Ireland
does not produce enough tax to pay for the Public Service staff
and the diminishing services that it provides. The London treasury
subsidises Northern Ireland as economic basket case to the sum
of £9 billion every year. The real effect of low revenue
accruals and getting lower as Northern Irelands economy fails
year on year to generate income will continue if the Conservative
Government fails to implement low corporation tax level of 5%
to give Northern Ireland the impetus to attract new investment
and also to counteract the malign influences that prey on the
disaffected.
The Inland Revenue statistics prove that areas such
as Derry and other places west of the Bann have so much unemployment
and low incomes that they are incapable of paying tax and are
in fact a burden that requires tax transfer funds to meet their
living costs.
7. What evidence is there from other countries
that having different corporation tax rates on a regional basis
is effective?
The evidence is on Northern Ireland's doorstep where
Irish Republic corporation tax of 12.5% is emulated by a least
seven other countries in Europe with corporation tax levels of
9% Montenegro and Cyprus on 10%.
8. What are the implications for other regions
if there were different levels of corporation tax within the UK?
All Positive. The British
Government could redeploy the billions of tax generated in the
Greater London Southern regions of the UK to improve its own infrastructure
and that of the rest of the UK mainland.
The other regions of the UK have and to this day
in the North West of England benefit from Enterprise Zone status
in deprived regions of Tyne and Sunderland. I am not aware of
the UK Government having any great difficulties with selectively
engineering areas of the UK to benefit from Enterprise Zone status.
I might add the Enterprise Zone status granted to Northern Ireland
in 1981 with particular reference to its failure here in Derry
to create jobs can be evidenced by visiting the former Courtaulds
factory at Campsie. The largest factory in Europe, 1 million square
foot, is increasingly decrepit in appearance minimal in its contribution
to job creation and gifted away at 25p per sq.ft. and former Ministry
of Commerce factories also in Springtown lying vacant and derelict.
A modern Fruit of the Loom factory at Campsie has been vacant
also for years and the beneficiary of many millions of grant aid
that should be a productive job creating zone of employment for
new technology companies similar to those in Southern Ireland
today. The examples I have given are just a small sample of the
loss of manufacturing in textiles and engineering that have not
been replaced by new technology based enterprises that our near
neighbour has so wisely targeted.
We need politicians with the "wisdom to see
and the courage to change" from the failed policies that
are destroying hope.
The EU have in 2001 sought to tax harmonise rates
to a higher median level but have failed to enforce this policy.
The UK Government, a signatory to the Lisbon Treaty has opt out
policies as has Ireland on taxation and can in any case veto the
EU wish to increase tax burdens. It is also likely that the EU
may wish to prevent job creating agencies from 2013 assisting
companies by way of grant aid. In the light of possible damaging
policies regarding corporation tax the UK Government should seek
the support of the Southern Irish Government to justify refusal
to agree corporation tax increases to the EU median level desired
by France or Germany by accepting the existing corporation tax
level of 12.5% for Irish Republic and initial 5% corporation tax
to 2020 for N.Ireland. The 5% rate will only ameliorate the serious
problem of unemployment and lack of job creation as the financially
induced crisis has and will continue to beggar Northern Ireland
to at least 2015. The lower 5% tax will also differentiate the
all island economy and help to focus inward investment to the
very deprived Ulster Province of Northern Ireland.
I have copied this letter together with my letter
of reply dated 2 September, 2010 to the Irish Republic Department
of Enterprise Trade and Innovation Assistant Secretary, Mr Brian
Whitney. This letter was in response to my meeting with him in
Dublin on 13 July, 2010 at his office and with a Senior IDA Officer.
The meeting at my request was to seek the support of the Irish
Government to recognise that fiscal policies and rigid enforcement
of economic border since joining the EU in 1973 was 1930's protectionist
policy that has no place on this small island where both jurisdictions
are in the common market as well as a global market. The UK Government
has not custom patrolled or stopped me personally as a cross border
businessman since 1973.
I thank you for your letter of 3 September, 2010.
I am enclosing copies to the Secretary of State and all members
of the Northern Ireland Affairs Committee.
13 September 2010
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