Cost of corporation tax reduction 'overestimated by £133m'
The annual cost of a lower corporation tax rate in Northern Ireland may have been overestimated by a staggering £133m, Grow NI has said.
The group, which represents businesses in favour of a cut in business tax, has said its analysis of recent HMRC and Treasury figures show that the cost of a 12.5% corporation tax rate may be closer to £192m, as opposed to the Treasury's estimate of £325m.
The group argues that if the initial impact of reducing the corporation tax rate was averaged out over the period during which it would be introduced, the annual cashflow cost to the block grant could be as low as £100m per year.
Grow NI claims that the gaps in HM Treasury figures include tax-motivated incorporation, were estimated by the Treasury in 2011 to cost £50m per year.
However, Treasury Minister David Gauke told the House of Commons in February that the true cost could be closer to £5m.
Based on the current rate of 20% and HMRC tax receipts, the group also argues that the reduction in existing firms' corporation tax would be £43m less than previously estimated and that the additional corporation tax generated by new companies locating here could be larger than expected.
The figures come as Grow NI calls on the NI Executive to explore the possibility of financing whatever gap emerges in public spending reductions if a reduced corporation tax is introduced.
Eamonn Donaghy, head of tax at KPMG and spokesman for Grow NI, said: "The only growth in jobs in the near future will come from the private sector and reducing the corporation tax rate will result in tens of thousands of jobs being created over 20 years.
"It is therefore vital that we work with our government partners to accurately determine the tax cost of reducing the corporation tax rate here in Northern Ireland and explore innovative ways to finance any early year's shortfall in tax receipts."
The Executive was granted the power to control corporation tax as part of the Stormont House Agreement on the condition that welfare reform was introduced.