Deadline for public views on corporation tax cut extended
The public consultation on devolving corporation tax powers to Northern Ireland has been extended, enabling more people to register their views on the move.
Enterprise Minister Arlene Foster encouraged business leaders and members of the public to engage in the exercise.
The Government has not yet signalled whether it will hand tax-varying powers to Stormont, and on his visit to Belfast last week Prime Minister David Cameron stressed the importance of the Treasury consultation showing strong community support.
It opened in March and was set to end next week, but has been extended to July 1.
Businesses have backed the move to cut the rate from 26% to something closer to the 12.5% in the Republic amid claims it would generate 4,500 new jobs a year.
But others, including unions, are opposed as it could only be delivered with an accompanying cut to public funding — as much as £400m — from the Treasury.
Mrs Foster, answering Assembly questions on behalf of Finance Minister Sammy Wilson as he attended the funeral of his late Dublin counterpart Brian Lenihan, said the balance of facts indicated that lowering the tax would be beneficial. “I don't have any doubt and I think most commentators in the business world don't have any doubt that reducing the rate of corporation tax here in Northern Ireland would have a significant benefit to the economy,” she said.
“The question then comes around, is that benefit greater than the cost that it would bring to the block grant? And looking at, certainly, the independent evidence that I have before me in my own department, I very much believe that the lowering of corporation tax would be of huge benefit to us here in Northern Ireland.
“It would bring in more foreign direct investment, it would bring many more jobs into the economy and my economic advisory group have indicated up to as many as 4,500 new jobs every year.”
Meanwhile, the Finance Minister has backed the devolution of tax-raising powers here but believes it must not be achieved at any price. Speaking at a breakfast meeting of the Northern Ireland Assembly and Business Trust in Stormont, Mr Wilson said that it is imperative that any cut imposed on the annual block grant by the Treasury is not destabilising to the local economy in the short-term.
“My fear is that there appears to be such enthusiasm from the business community, other political parties and stakeholders that the Treasury sees this is a pushover that we will take at any price,” he said.
“It needs to be at a price that is fair and if we can get that and get our foot in the door, then it can be an important lever for the Executive in the future when trying to rebalance the economy.” Figuring out what that fair price is won’t be easy as the Treasury isn’t sure of the amount of corporation tax collected from Northern Ireland at present, given that many companies don’t declare separate tax for businesses in Northern Ireland and those of the same company based elsewhere.
Estimates, according to the Finance Minster, vary from 1.1% to 1.6% of total corporation tax receipts in the UK, a difference of £90m to £100m.
Also speaking at the event was Dr Esmond Birnie, chief economist at PwC in Belfast.
He said devolving tax-raising powers would be “nice to have but it’s not clear if it would be a game changer”.
But Joanne Stuart, former chair of the Institute of Directors and head of Attrus, said that a cut in corporation tax is the “final piece of the jigsaw” which will benefit all companies in Northern Ireland, both large and small.
Everyone should be aware: there is a risk here
By Brendan Morris
It is one of the cornerstones of a democracy that taxes can only be raised with the consent of the people. Thus, politicians have a responsibility to make sure that people understand the implications of changes to their tax system.
Cutting corporation tax will leave a shortfall in our region's finances. Of course, the plan is that this will be made up by increased inward investment. But there is a risk here, and people must be made aware of it. For all its attractions, a cut in the rate is not an automatic one-way bet.
Some will see a cut as a tax break for big business at a time when most households across the UK are seeing their taxes rise. There is a persuasive counter-argument to this in terms of the increased economic activity and employment a rate cut should bring, but politicians and business alike will need to keep explaining this.
The tax paid by a company on its profits is the product of the tax rate applied to its taxable profits. All discussion has been about reducing that rate. However, what if Northern Ireland had power to adjust that taxable profits figure for local companies to give incentives for particular local actions, or additional deductions for activities we need? Perhaps politicians need to consider wider powers than just cutting the rate, though if they do there will be a complexity burden to bear in mind for companies operating beyond Northern Ireland into the rest of the UK.
Brendan Morris is chairman of the Chartered Institute of Taxation Northern Ireland branch
Yes, no, maybe... the proposal that has left key figures divided
DUP leader Peter Robinson has called for Northern Ireland's corporation tax to be lowered to a basement rate of 10%.
The First Minister maintains that such a drop would create jobs and boost the economy through foreign direct investment and allowing indigenous companies to grow.
Alliance Party leader David Ford has said that cutting corporation tax would “best and most quickly facilitate a step-change in the local economy”.
SDLP economy spokesperson Dr Alasdair McDonnell said that his party wants the rate to match that of the Republic’s at 12.5%, and “it would set the local economy on a new trajectory”. He also pointed to the fact that Irish Taoiseach Enda Kenny has also backed the move rather than opposed it.
Secretary of State Owen Paterson is one of the biggest campaigners for a drop, describing it as “the economic equivalent of the peace process”, and warning that there is “no plan B” to rebalance the economy.
Peer Lord Kilclooney is a high-profile opponent of lowering the levy.
As a major employer through his media company and property interests, the former Ulster Unionist MP fears that Scotland and Wales would also demand a drop in their tax rates, therefore negating any competitive edge for Northern Ireland.
He has also claimed that funding the change would mean less money for public services such as health, education and infrastructure and said that the only beneficiaries will be business people.
Last week independent MP for North Down, Lady Hermon, also came out in opposition to the move.
She has highlighted the economic woes of the Republic of Ireland, despite it having a low rate of corporation tax.
Green Party MLA Steven Agnew has said that cutting the rate would be “wholly irresponsible”, saying it would cost jobs, impact on the block grant and damage front-line services.
Ulster Unionist leader Tom Elliott has said that should the decision to lower the rate be taken, it should be done incrementally over a number of years.
But he has also suggested an “imaginative review” of non-domestic rates to help rebalance the economy.
However, the party has been strong in calling for the devolution of tax-setting powers to Stormont.
SNP leader and Scottish First Minister Alex Salmond is backing a drop, but there is a catch — he is hoping that if the corporation tax is lowered here his own country will follow suit.
At a meeting of devolved government leaders last week, he said: “Each administration pushes for its priorities. I think the success — and I hope it will be success — of Northern Ireland, in pushing for its claim on corporation tax will open up a very progressive agenda which will have implications elsewhere.”
But it could cost Scotland more, potentially up to £1.5bn in funding from Westminster.