PROPOSALS to devolve certain taxes in England and Scotland will keep the campaign to lower Northern Ireland's corporation tax rate alive, a campaigner has said.
In March, the prime minister said there would be no decision on devolving tax-setting powers to Northern Ireland until after the Scottish referendum in 2014.
A large lobby of business and political figures in Northern Ireland wants to see corporation tax lowered in line with that of the Republic of Ireland's at 12.5%, to stimulate job growth and inward investment.
On Wednesday the London Finance Commission's Raising the Capital study said that London needs greater financial autonomy and proposes devolving council tax, stamp duty land tax and business rates.
Meanwhile, a new income tax regime will be introduced in Scotland in 2016, which will mean that the UK income tax rate will be reduced by 10p and can be replaced by a Scottish Income Tax Rate of whatever the Scottish parliament decides.
KPMG tax expert and corporation tax campaigner Eamonn Donaghy said that the key reason to devolve any tax will be to promote jobs, infrastructure investment and growth – all of which Northern Ireland desperately needs.
"The issue for London is that it is the powerhouse of the UK economy and it contributes its surplus to the rest of the UK," he said. "So it would be difficult for London to have a different income tax or corporation tax rate. However, property taxes are more localised and it could make sense for London to take more control of its finances by using devolved property tax as a driver to do so.
"For us in Northern Ireland we receive £10.5bn per year from the rest of the UK – mainly London and the South East – and our private sector is much smaller that the UK average. The amount of corporation tax raised in Northern Ireland is thus comparatively very low and is unlikely to grow much in the foreseeable future.
"A cut in the rate of corporation tax is an internationally accepted way of growing a small economy by means of attracting long-term foreign direct investment and encouraging reinvestment by local businesses."This will eventually lead to increased tax revenue both in payroll taxes and corporation tax and a reduction in the dependence on the state through unemployment benefits.
"More jobs in Northern Ireland and less dependence on Great Britain – everyone wins."
However, Mr Donaghy warned that devolution of tax is not a 'one size fits all' solution.
"If London can do better with devolved property taxes and Scotland can do better with devolved income tax then these may not be appropriate for Northern Ireland," he said.
"At the same time a lower corporation tax rate for Northern Ireland is a clear game-changer for us but that does not mean it has to be applied in Scotland or London, indeed the cost of doing so in either Scotland or London would be much more significant and the benefit to cost ratio would be much smaller."