There was a letter from the First Minister in the
Western Mail on Saturday, talking about how devolving Air Passenger Duty would
make a huge difference. That part was
nonsense, of course. Devolving APD in
itself makes no difference whatsoever; what might make a difference is changing
the level of taxation. Devolving the
power might or might not lead to change in tax rates – that actually depends on
taxation policy rather than directly on where that policy is decided.
But there was
one line in the letter which particularly drew my attention, and that was where
the First Minister said, with clear approval of the principle, “The UK government has already accepted the
case that it is appropriate for there to be some tax competition following the
devolution of tax powers.”
Perhaps one
should never expect consistency from politicians, but I seem to remember that
that wasn’t always his position. Let’s
consider his views on the devolution of Corporation Tax,
when he said “When it comes to
corporation tax I am sceptical on this and if we have it devolved to Northern
Ireland, Scotland, England and Wales, I think there is a genuine risk of a race
to the bottom with everyone reducing corporation tax; that would be great for
business, but hopeless for the public purse.”
So, devolution
of taxes that he wants to cut would lead to healthy tax competition; devolution
of taxes that he doesn’t want to cut would lead to a race to the bottom. There is nothing wrong with taking a
political view as to which taxes should be cut, held the same, or increased –
that’s an entirely legitimate way of enabling people to compare and contrast
political parties and programmes. It is
not, however, a sound or principled basis for deciding where taxation powers
should reside.
‘Tax
competition’ and ‘race to the bottom’ are just two different ways of describing
the same thing.
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