Tax should be less taxing

Before we start, I am not an economist. From Wikipedia: A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country’s typical economic laws. The category ‘SEZ’ covers a broad range of more specific zone types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free … Continue reading “Tax should be less taxing”

Before we start, I am not an economist.

From Wikipedia:

A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country’s typical economic laws. The category ‘SEZ’ covers a broad range of more specific zone types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC).

SEZs are often developed under a public-private partnership arrangement, in which the public sector provides some level of support (provision of off-site infrastructure, equity investment, soft loans, bond issues, etc) to enable a private sector developer to obtain a reasonable rate of return on the project (typically 10-20% depending on risk levels).

One of the best things about meeting new and interesting people is in the stories they relate and the new words and phrases they bring. Today, the phrase was “Special Economic Zone”.

Also…from The Paradise of Capitalism, which also lists many of the potentially negative effects of an EPZ with respect to potential abuses from employers:

The first EPZ (Export Processing Zone) was established in 1959 in Ireland but it was in East and South East Asia that the idea found most enthusiastic support. Countries like Taiwan , Singapore , Malaysia and the British colony of Hong Kong embraced the concept that economic growth can be promoted best through encouraging exports rather than through import substitution.

In the sixties there were just 10 such zones around the world, which by the mid-eighties had increased to 176 zones across 47 countries. In 2003, the number of zones increased to over 3000 across 116 countries.

There are risks, listed in both articles with Free Trade Zones but there are ways to reduce them. Limit the applicability of the Export Processing Zone to, for example, Software and Digital Content. Ensure that the incentives only apply to products/service which are primarily sold outside the hosting country. These aren’t enough but there’s certainly a seed of an idea.

Scotland, hotbed of game development in the UK, is lobbying for up to a 20% tax break for their industry, citing Gary Langlands, president of the Dundee and Angus Chamber of Commerce:

“Canada, France, Australia and the US already offer subsidies. Let’s see fair play to support our own industry,” he added.

This is in response to an EU statement which authorised a tax break for French games companies which met the criteria of “quality, originality and contribute to cultural diversity”.

As the UK film and music industry already enjoys tax breaks, it would be nice to see some of our elected representatives in the White House On The Hill, pursuing what can be done to increase the chances of local companies. The only tax break scheme I am aware of which applies in Northern Ireland is the R&D Tax Credits which, direct from HMRC, is not applicable to content development.

As I mentioned, I am not an economist. I’d like to speak to some, hear their thoughts and see whether anything is possible.