Business tax crusaders emboldened
Published 22/03/2013 | 04:20
The planned reduction in the rate of corporation tax across the UK revealed in this week's Budget doesn't weaken the argument for devolving its setting powers to Northern Ireland, according to economists and tax experts.
They agreed with Finance Minister Sammy Wilson that the reduction to 20%, rather than the 21% previously planned, announced by the Chancellor yesterday means that giving tax setting powers to Stormont costs less and also shows the Government backs lower business tax.
Professor Neil Gibson, director of the Northern Ireland Centre for Economic Policy at the University of Ulster's business school said that George Osborne has shown he is ideologically behind lower corporation tax.
"I don't think that the Chancellor's comments should dissuade us, quite the opposite," he said.
"He tells us he believes that low corporation tax is good for investment. I think we should be encouraged by the comments yesterday as George Osborne has said that he believes, as we all do in this lobby, that low corporation tax is good for investment."
Proponents of a cut in Northern Ireland's corporation tax in line with that of the Republic at 12.5% believe such a move will help stimulate jobs, attract inward investment, will make Northern Ireland more competitive and encourage more companies to incorporate.
Opponents say that as the UK rate comes down, the drive to lower ours will become irrelevant.
"When it comes to devolution of corporation tax setting powers to Northern Ireland, the 1% UK-wide cut in the main rate of business tax will make it cheaper to implement," Eamonn Donaghy, tax expert with KPMG, said.
"But there's still a significant gap of 7.5% between us and the Republic. If you think of the UK as a large DIY store, Northern Ireland is the yard out the back and we need to do something different if we're going to get people to come out here.
"That's why we need to be able to offer even lower rates of corporation tax.
"The most recent drop in the UK rate means the cost to Northern Ireland will be lower.
"There is an absolute need for the Northern Ireland economy to be balanced, there was nothing else in the Budget specific to Northern Ireland and there is still a big enough discrepancy between 20% and 12.5% to make a big difference."
The DUP's deputy leader Nigel Dodds MP agreed that the decision by the Chancellor to reduce corporation tax is good for Northern Ireland.
"This is a positive statement for Northern Ireland," he said.
"Not only does it indicate the Government's recognition that low corporation tax helps attract investment but it also reduces the differential the Executive would have to pay if corporation tax powers were to be devolved to the province."
He added: "If the Coalition Government was to devolve corporation tax-setting powers it would be a game-changer for our economy."