Opinion

Newton Emerson: Sinn Féin tax plan would transform local politics

Newton Emerson

Newton Emerson

Newton Emerson writes a twice-weekly column for The Irish News and is a regular commentator on current affairs on radio and television.

John O'Dowd of Sinn Fein  
John O'Dowd of Sinn Fein   John O'Dowd of Sinn Fein  

It turns out that Sinn Féin has a fascinating tax plan for the executive.

A vague mention of more powers in the party’s Westminster manifesto has been fleshed out by former education minister John O’Dowd.

Speaking to Radio Ulster, he said Sinn Féin wants the same taxes devolved to Stormont as transferred to Scotland, notably income tax and stamp duty, plus two additional powers - over capital gains tax on property and employer’s national insurance contributions.

It might seem pointless to propose this when Sinn Féin has mothballed Stormont, perhaps forever.

The reference to Scotland highlights deeper dysfunction. Edinburgh and Cardiff devoted much of their political energies over the past decade to negotiating further tax devolution from London. Almost every kind of tax was assessed for this, followed by detailed analysis, debate and haggling, the upshot of which is that similar packages for Stormont have long been there for the asking.

But Stormont did not ask, or even pay these developments much attention. Instead, it devoted its energies to a one-off case for devolving corporation tax that is about to be rendered pointless just before the final hurdle. The UK is cutting its corporation tax rate, Brussels will make Dublin raise its rate and President Trump wants to charge companies the difference between their overseas and American rates.

Sinn Féin’s new tax vision, if it was ever delivered, would address all these problems and more.

Income tax powers alone could transform Northern Ireland politics by creating a meaningful link between wallet and ballot.

Acquiring the ability to keep your promises soon sorts out the wheat from the populist chaff. It is telling that Edinburgh has had income tax varying powers since the start of devolution, yet has never used them in 18 years of supposedly centre-left government.

Pressed on what Sinn Féin might do, O’Dowd promptly equivocated on raising income tax and said any increases would only apply to the rich.

As there are almost no rich people in Northern Ireland, SNP-style reality seems to have dawned on republicans the moment they considered the question.

Income tax may not be enough to make voters switch between unionist and nationalist parties in Northern Ireland. However, it could easily become the defining issue within those blocs - and it is far from a given that Sinn Féin would be the higher-tax party within nationalism. A Fianna Fail-esque future beckons.

Stamp duty was judged by Treasury reports on Wales to be the perfect tax to devolve, due to its simplicity to collect.

Last year the Welsh government redesigned it as a ‘land transaction tax’ to serve its particular policy objectives, such as discouraging second-home ownership.

Combining this with capital gains tax on property, as proposed by Sinn Féin, would give Stormont a powerful set of levers to control the housing market. Stamp duty affects individual buyers or sellers, while capital gains tax targets landlords and developers. Bubbles could be burst, speculation and hoarding could be penalised and supply could be better aligned with demand. This is no radical leftist agenda - the tendency across Ireland to confuse property with investment is to some extent the opposite of capitalism.

Finding somewhere to live has become the most pressing issue for young people starting out on life. There would be no better way to ensure a new generation of politics than by holding Stormont to account for it.

Devolving employer’s national insurance contributions is the most intriguing proposal of all. This is a payroll tax - literally a tax on jobs - currently levied at 13.8 per cent of salary, with no upper limit.

It is insanely at odds with almost every policy goal, yet western governments are increasingly forced to rely on it because staff are harder than profits to hide offshore. The UK now raises almost twice as much from employer’s national insurance as from corporation tax. A big country can get away with this up to a point but it is one of the first things a devolved region should opt out of - especially one that wants, in effect, to be a base for offshore staff.

Devolving any aspect of national insurance would mean shattering the illusion of a state pension pot sitting somewhere in all our names. However, that has been on the cards for years.

Tax powers are the political equivalent of adult responsibility.

Sinn Féin has made any prospect of grown-up politics on Stormont conditional on establishing respect.

Might that possibly be putting the cart before the horse?

newton@irishnews.com