Belfast Telegraph

Friday 24 October 2014

Countdown to D-Day in Northern Ireland corporation tax battle

Stormont hopes are high as Scottish vote looming

Making moves: Prime Minister David Cameron will decide on corporation tax as soon as Scotland votes

Northern Ireland is closer to a decision on whether to devolve corporation tax-setting powers to Stormont than ever before, according to a tax expert.

Eamonn Donaghy from KPMG was speaking one year to the day before the Scottish independence referendum on September 18 2014, the date after which the Prime Minister said he would make a final decision on the issue of Northern Ireland's big business tax.

If David Cameron grants the tax-setting powers to the Executive after that date, he has pledged to do so in a special act of parliment to ensure it becomes law before the dissolution of parliment in Westminster in March 2015.

"This is the first time that a definitive timetable has been committed to and whilst the final outcome is dependent on the referendum in Scotland, one feels that should the people in Scotland vote to stay in the United Kingdom, there is a very strong prospect of the Northern Ireland Assembly getting the power to set a lower corporation tax rate," Mr Donaghy said. He said that despite recent economic data becoming more bullish, the Northern Ireland economy is still some way from full health and needs a kickstart from reduced corporation tax rates.

"Currently over 60,000 people are out of work, youth unemployment is still proportionately far too high and many of our graduates are leaving Northern Ireland never to return," he said. "Our private sector, whilst tenacious and resourceful, is still far too small and our reliance on public sector expenditure is still far too high."

He said that Northern Ireland's per capita economic output, even at the peak of the boom in 2007, was still only 80% of the UK's economic average so the region has further than most to climb to reach economic parity.

That's why, Mr Donaghy said, a cut in corporation tax in Northern Ireland, from the currently level of 23%, is needed.

He believes that cutting big business tax to 12.5%, the same level as that in the Republic, will help Northern Ireland attract much greater levels of inward investment.

Business organisations here have got behind the call for tax-setting powers to be devolved to Stormont from Westminster but detractors believe the benefits will be negligible and outweigh the lost tax revenue. The campaign for devolvement lost some of its momentum earlier this year when David Cameron delayed a decision on the issue until after the Scottish referendum.

All the Executive parties agree that the power to levy corporation tax should be devolved to Northern Ireland. The business profits tax has been charged at 23% since April and will fall to 20% in 2015. Local parties want to reduce it to match the 12.5% charged in the Republic. However, under EU rules, that would involve a cut in our block grant.

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