The effect of this exemption from tariffs is to provide a tax subsidy to products sold from the freeport if (and this is critical) they are exported. That means that this benefit goes to other countries, and not into the UK market.
Eh?
We don’t charge export tariffs. So, what’s this tariff that exports don’t pay then?
So, for example, current UK freeports waive the employer’s national insurance charge in respect of people employed in freeports, meaning that the cost of employing people is reduced. Again though, let’s be clear that this does not reduce tax for the employee. All the benefit of this goes to the employer. It is they who get the subsidy.
Amazing really for on odd numbered days Spud will insist that employers’ NI is incident upon the workers’ wages.
It is they who get the subsidy
Hang on – that’s pure elynomics. It’s not a subsidy, it’s a concession or an incentive or whatever else you prefer but it’s not a subsidy.
Surely employers’ NI is incident upon workers’ wages? If employers’ NI were raised ten points tomorrow, wages would be cut – not profits – to make ends meet.
Therefore the beneficiaries of (this particular tax advantage of) freeports are the workers, not the companies.
And if confronted he will tell you that this is an odd-numbered day and so he’s been entirely consistent. Then if you point out that it’s the 10th he’ll tell you that the conventional definition of ‘even’ is incorrect and then ban you.
” If employers’ NI were raised ten points tomorrow, wages would be cut – not profits – to make ends meet.”
In the short term, I don’t think that would fly – you would find it very hard indeed to cut the headline wage rate in response to a change in the E’er rate, mostly because the vast majority of people don’t understand tax incidence and genuinely believe that the employer is paying this tax, not them.
My suspicion is that this might actually appear in two places – the short term incentive would be to raise prices before adjusting back onto wages.
“My suspicion is that this might actually appear in two places – the short term incentive would be to raise prices before adjusting back onto wages.”
It would also affect recruitment – if you can’t drop the wages you pay fewer folks. Redundancies might be too drastic but recruitment freezes would definitely be on the table. So the workers themselves don’t take the hit, but the invisible folks who would otherwise become workers do.
“If employers’ NI were raised ten points tomorrow, wages would be cut – not profits – to make ends meet”
If one input cost increases dramatically business look to reduce other input costs shocker! Film at 10.
Wages can’t nominally decrease, but anybody noticed a little bit of inflation going round at the moment? A lack of/smaller pay rise will have exactly the same effect — I was told explicitly last year that my pay rise was a bit lower because of the upcoming hike in class I NICs.
Prices can go up/down if the tax is uniformly applied across the whole market, however, there will be limited capacity for employment in the “free ports”, so there will be a benefit to the business of being there. That’s the point of them. But if employers in the rest of the country can’t reduce their NI bill then the companies that get into the free ports will be making abnormal profits as their competitors cannot reduce prices to match. They’re also targeting areas of high unemployment, so there is a sufficiently large reserve army of unemployed that it is unlikely there will be significant upward wage pressure within the free port region.
How this works with remote working is interesting — could you open a brass plaque in the free port and employ remote staff or staff who nominally work there but don’t in practice?
“there is a sufficiently large reserve army of unemployed that it is unlikely there will be significant upward wage pressure within the free port region.”
Depends on the jobs and what skills are required.
OTJ training? What’s that?
OTJ training? What’s that?
Learn by doing – On The Job training