Why Michael Noonan is right to downplay UK corporate rate pitch

Maybe it’s just me, but when a politician — particularly one as senior as the finance minister, and especially when that minister is wily old Michael Noonan — tells us that Britain reducing its corporation tax to 15% is no big deal, I begin to wonder what I’m not being told.

It’s only a few short weeks since the Brexit campaign was in full swing and any impact on our economy was being played down.

Indeed, the reverse, to some extent, is true in that Brexit was akin to the ‘land of milk and honey’, full of opportunity.

Five minutes after the poll returned a shock Leave result, it seemed to turn around.

The message soon became: What had English voters done, and what were they going to do to protect themselves?

Across Europe many countries were eyeing up parts of the UK economy, particularly European-focused financial services, with a view to having those businesses settle in their country.

We were among that pack.

There were many things wrong with Brexit, starting with David Cameron’s decision to put self-interest and his party before his country in deciding to have the poll in the first place.

Then the momentous decision pivoted on a 52%-48% result.

Meanwhile, the main Brexit protagonists, Nigel Farage and Boris Johnson, departed the stage when the enormity of the decision taken loomed large. To many, it appeared they had no idea what to do next.

It might not be what Ireland wanted, but it’s now a done deal.

Other folk in the UK are taking up the challenge.

On the day of the result, Mark Carney, the governor of the Bank of England, was one of the first to set out his stall, saying the Bank of England was taking the necessary steps to protect the British economy and face down any subsequent financial and currency market upheavals.

As we all know, and as the Remain campaign predicted, markets slumped.

Sterling dropped to levels not seen in over 30 years against the dollar.

Indeed, the UK may not decry seeing its currency devalue as it makes it a bit more attractive than its competitors. It will make it easier for the UK to sell abroad.

Back home, we decry the fact that we have no control over our currency.

There are downsides, but the UK may have some cards up its sleeve to fight its way out of a tight corner.

British chancellor George Osborne told the Financial Times that the UK is aiming to reduce its headline corporation tax rate to 15%, and possibly even lower.

He had already advised in his previous budget that he would bring it down to 17% by 2020.

That’s getting very close to the Irish headline rate, or as Feargal O’Rourke of accountants PwC put it: “The UK has parked its tanks on the lawn.”

It has indeed, but why are we surprised?

In another era, Ireland reduced its profit tax rate for manufacturing companies to create a sustainable economy and move away from one based on the fortunes of agricultural products.

Mr O’Rourke advised a ‘wait and see’ approach before Ireland jumps the gun and starts trying to look again at our own corporate tax offering.

Governments have fought long and hard to maintain the current rate, and it is a battle that is not over.

It would be overly foolish to raise our proverbial heads above the parapet.

Britain has a long way to go.

It has still not formally advised the EU that it’s out.

Until that happens, the real exit wheels will not start turning.

There are already those in Europe implying that they will make life difficult for Britain.

With his ignorant and triumphalist tirade in the European Parliament, Nigel Farage only made matters worse for the UK.

Mr Farage cannot be accused of looking for friends at court, so he started calling his enemies names.

It may well turn out that reducing its corporation tax rate to 15% only goes some way to compensate British industry for the tariffs that will have to pay.

Were Britain to reduce its corporate tax rate and get reasonable trade terms and access to EU markets, the effects would for sure be negative for Ireland.

Britain has one distinct advantage on Ireland.

It has a population of over 60m people.

That in any man’s money is a sizeable market that would on its own support many industries.

Keep a weather eye open, but ‘wait and see’ might be the best advice, before rushing to rash action.

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