Corporation tax cut 'still on agenda'
Chancellor George Osborne has confirmed that proposals for a separate rate of corporation tax in Northern Ireland remain on the coalition government's agenda.
Mr Osborne announced that the UK's headline rate of corporation tax would be cut by 1% in each of the next four years until it reaches 24%.
He also said the Treasury would publish a White Paper on the feasability of introducing a lower corporation tax rate in Northern Ireland as flagged in the Conservative manifesto and coalition agreement.
"The Government will publish a consultation paper in autumn 2010, on rebalancing the Northern Ireland economy. This will include options to promote enterprise in Northern Ireland and will examine mechanisms for changing the corporation tax rate as well as economic and public service reform," he said.
Michael Hall, managing partner at Ernst & Young Northern Ireland and part of the Economic Reform Group that has lobbied for the local corporate tax rate to come in line with the Republic's 12.5% rate, welcomed the announcement.
"It is interesting to note that the confirmation of reduction in Corporation Tax, a new 20% Vat rate and public sector spending cuts all mirror economic conditions south of the border. The reduction in corporation tax is welcome as it enhances the UK's proposition in attracting foreign investment," he said.
"For the first time they are moving towards a regional policy with national insurance exemptions. That's probably a pretty important signal, going forward, that they are open to looking at ways to stimulate various areas outside of London. That paves the way in mindset terms that the Northern Ireland CT rate is on the agenda and they are seriously looking at it. In previous budgets there would have been very little that would have had a regional angle."
University of Ulster economist Mike Smyth said the ERG had already met with Treasury and was hopeful the issue would move forward.
"Even the naysayers realise this won't just go away. The big decision will be, will our Executive actually ask for the tax varying powers? I think we can persuade them to do it if only because there are no other alternatives. Secondly, once they have it when will they trigger it? Any decisions about corporation tax will take place long after these cuts have faded into memory," he said.
"Corporation tax should be seen as a long term replacement for (the austerity measures), because it holds the prospect of more and better paid jobs for our children."