CUTTING WELSH CORPORATION TAX

In a post Brexit world (if the Unionists are serious about delivering for Wales) there is no real reason why Wales could not (with the appropriately devolved powers) cut Corporation Tax to bring businesses to Wales and boost wages. Plaid Cymru AM for Carmarthen East & Dinefwr, Adam Price (speaking on the BBC’s Wales Report on Tuesday night (16^th May) said that Brexit offers opportunities for Wales such as introducing “variable tax rates across the UK” including Corporation Tax and VAT.

The Party of Wales has long advocated transferring responsibility over taxation from Westminster to Wales, ensuring taxes paid by people and businesses in Wales stay in Wales. Plaid Cymru has previously called for Corporation Tax to be linked to the size of the economy, meaning poorer areas would benefit from lower taxation whilst richer areas would pay more.

This would certainly be a fairer and more sensible system, which could incentivise businesses to invest in areas where investment is most needed, and could lead to increased wages across Wales. Brexit naturally offers some opportunities as well as some threats our economy.

Adam, Price called on politicians to take advantages of the opportunities, suggesting Wales could set lower rates of Corporation Tax than the rest of the UK, giving the country a “competitive advantage” to attract businesses to Wales and to help existing businesses grow.

Plaid Cymru’s finance spokesperson, Adam Price, said:

“Politicians from all parties must look to the future and get on with making sure we get the best Brexit possible for our country. There are specific risks to our economy with our manufacturing and agriculture sectors being heavily driven by our exports and particularly to the EU, and we must do everything we can to defend those sectors, but there are also some opportunities which are not often talked about.

“In coming out of the EU, for example, we now have the ability to set varying rates for different taxes in the different countries that make up the UK. We could have a lower VAT rate to help our tourism sector and our construction sectors for example. We could also do the same for Corporation Tax and ensure business taxation reflects the lower levels of economic strength in the different UK countries.

“If we cut Corporation Tax in Wales it would give our country a competitive advantage which would draw businesses to Wales and help those who are here already to grow, to employ more people and to offer higher wages for their employees.

“With one rate of Corporation Tax for the whole of the British State including every single country within it, there is no incentive for businesses to go anywhere but the richest areas like London and the south east of England. If we want people in Wales to be paid higher wages, to be offered better mortgages and for our Welsh Government to have more money to invest in our health service for example, we have to make Wales attractive to businesses.

“We have to make the most of every opportunity that Brexit offers and make sure we defend Wales from every threat. The only party that is fit and able to do that is Plaid Cymru.”

NORTHERN IRELAND 1 WALES 0

Legislation that should allow Corporation Tax powers to be devolved to Stormont has been published. Corporation tax is levied on the profits made by companies. The current rate paid by businesses in Northern Ireland is 21%, which compares unfavourably with the 12.5% rate in the Republic of Ireland. The Northern Ireland Executive wants to be able to match the tax rate in the Republic. The new powers won't come into effect until 2017.

It is vital that our country has the tools to build a fair and sustainable economy and it is important that power is fairly balanced across the UK, with Wales having parity with the other constituent parts. The Silk Commission recommended that Corporation Tax should be devolved to Wales in the event of it being devolved to other parts of the UK.

The Westminster Con Dem coalition government plans to pass the law before May's general election. All the political parties in Wales agreed to this principle and Plaid Cymru has long argued the case for this important lever to be made available to the Welsh Government. The party, formally known as New Labour, has said that it will not oppose the passage of the Bill. 

A QUESTION OF STATUS?

When it comes to tax, most of us pay it and most of us probably pay our fair share, and even a proportion of corporations (multi-national or otherwise) end up paying some degree of tax - despite the best efforts of creative accountants. The question of what exactly is a corporation and how much tax it should pay came before the House of Commons Public Accounts Committee (last month) in relation to the Duchy of Cornwall.

The Duchy of Cornwall, the Committee heard, provides the heir to the throne was a private income,  was not a corporation and that the prince voluntarily pays income tax. The Duchy of Cornwall, despite the name, happens to have significant landholdings well to the east of the Tamar which included the Oval Cricket Ground in London and a third of Dartmoor, not to mention pretty extensive property in Cornwall itself.  It is worth noting that the "title and honour" confers legal prerogatives in Cornwall which elsewhere belong to the Crown including for example the right to the property of people who die without heirs and ownership of the foreshore. Interestingly the duchy estate is worth some £762 million pounds.

A Royal aide revealed that the prince's estate does not pay capital gains tax because he "doesn't have access to the capital gains. The capital gains are all reinvested in the duchy for future dukes". MPs were that the profits were used to pay for the prince's public duties, as well as those of his wife the Duchess of Cornwall and those of Prince William, the Duchess of Cambridge and Prince Harry and that if parliament legislated to prevent Prince Charles using his private income in this way it would cost taxpayers more - to pay for his official duties - and he would be free to spend his money "on his other things".

A senior Treasury official told the committee, that the prince's tax arrangements worked this way because he does not pay capital gains tax because he always reinvests any profit from sales, and that "If the duke were to be taxed on the corporate income of the duchy as well as his income, he would be taxed twice."  The Treasury official also stated that the duchy differed to other corporations because the prince "is in the unusual position of getting all the income." The duchy estate of land and property - mostly in the south-west of England - was established by King Edward III in the fourteenth century to provide a private income for his son and heir to the throne.

The last time Prince Charles's representatives came before the Public Accounts Committee they were accused of performing financial "jiggery pokery" and he was said to be the recipient of the "best housing benefit scheme in the world".  The committee was fresh from finding the tax affairs of Google, Starbucks and Amazon wanting. Earlier this month, the prince faced calls from Andrew George, the Liberal Democrat MP for West Cornwall, to "come clean" about the Duchy of Cornwall's tax arrangements. Clarence House has said public funding for the Prince of Wales fell by £1 million to £1.2 million pounds in the last financial year, out of a total income of £20.2 million.

SPOT THE DIFFERENCE?

Thames Water, the UK's biggest water firm, has paid no corporation tax this financial year not to mention making £145 million pounds in pre-tax profit. The company said that it had delayed paying corporation tax due to investments in its infrastructure amounting to £1billion pounds a year between 2010 and 2015. They blamed the government as ‘the government's tax system allows us to delay, not avoid, payment of tax based on how much we invest." Last year Thames Water increased bills by 6.7% last year and its revenues rose 6% to £1.8 billion pounds.

Meanwhile Dwr Cymru Welsh Water put £338 million pounds into capital projects in the past year, some £76 million pounds more than in 2012. Dwr Cymru Welsh Water has three million customers, and has kept bills to the same level in real terms as in 2001. Research by Cardiff University claims the company is worth £1billion pounds a year to the Welsh economy. Its financial results come in a different form to companies with shares on the stock market. As the company is owned by the not-for-profit company Glas Cymru means that savings or efficiencies are ploughed back into Dwr Cymru or used to keep bills as low as possible.

Glas Cymru was founded 12 years ago, and works from the premise that having a public service company, which is a monopoly, being run on the basis of profit maximisation for shareholders does not work in the customers' interest. The Glas Cymru non-profit model of ownership could work elsewhere in other businesses and industries including rail franchises and energy developments.

Research published by Cardiff Business School said that Dwr Cymru contributes £1 billion pounds to the Welsh economy every year. Basically for  every £1 spent by the company, another 56p is generated for the rest of the Welsh economy. The research also noted that the water regulator Ofwat saying that between 2009/10 and 2014/15 Dwr Cymru customers face the lowest increase in average household bills of all water and sewerage companies in England and Wales.

On top of the £338 million pounds spent on infrastructure last year, the company is already committed to spending another £650 million pounds over the next two years, which could result in jobs for around 1,000 construction workers. The company has also reported that their financial reserves amount to £1.6 billion pounds, that's a tenfold increase compared with 2001 when Dwr Cymru was taken over by Glas Cymru. Dwr Cymru's borrowing or gearing has also come down. It now stands at 63% compared with 65% last year and 93% in 2001.

FOR WALES SEE...

At the moment Scottish and UK government ministers are busy discussing proposed new financial powers for Scotland. Treasury Minister David Gauke and Scottish Finance Secretary John Swinney have been taking part in the first meeting of the joint exchequer committee.

The Committee will look at the financial implications of the Scotland Bill, which is currently going through the Westminster parliament. The SNP have understandably said that answers are still needed over the planned tax changes.

The Scotland Bill will devolve £12 billion pounds of new tax and borrowing powers under plans which will see Scotland control a third of its budget. At the heart of this important piece of legislation is a recommendation that Scotland should take charge of half the standard income tax rate - 10p (with a corresponding cut in the block grant Scotland gets from the Treasury).

UK Con Dem ministers have said that the powers within the bill mean Scotland, with its annual £30bn budget, will have more accountability for the money it spends. The Scottish government, however, wants to cut the headline rate of corporation tax, paid through company profits, from 23% to 20% would create an extra 27,000 jobs over 20 years. UK ministers have said that any case to devolve corporation tax to Scotland would need to be strong. So the debate goes on...

Meanwhile in Wales...Carwyn‘s formerly New Labour lot have asked for nothing. Now if its offered, whatever it is (Corporation Tax variation, a better fairer financial settlement, control of criminal justice, etc) then they will take it, especially if it's offered to Northern Ireland and Scotland, but they won't ask for it?

Now I don’t believe for a moment that this stance is down to pride, its merely a lack of any real belief in the devolution project in Wales or any belief in Wales for that matter save for political expediency. They (Labour) may actually believe or at least pay lip service to the idea that Labour in power in Westminster will actually deliver for Wales.

Yet oddly enough they didn't manage to deliver when in power last time (between 1997 and 2010) nor have they previously so why should they in the future? So much for standing up for Wales...perhaps not?