There is increasing speculation that, faced with a deepening Irish economic crisis, the European Union will insist on Dublin raising corporation tax as the price of an added bailout.
According to BBC business editor Robert Peston, this means there may soon be no need for Northern Ireland to lower its tax to attract investment.
Speaking in Belfast yesterday, Mr Peston said the Republic's advantage on the North with its lower rate may soon disappear.
Asked during an event at Queen’s University by Ann McGregor of the Chamber of Commerce if lowering corporation tax here would rebalance the economy, Mr Peston said: “It seems to me that some tax-raising discretion here would be a good thing. This slight and understandable worry that the incredibly low Irish corporation tax rate has caused you some damage in terms of your ability to keep and retain business here may turn out to be a redundant worry.
“One of the things the Germans and the French are insisting on in terms of providing further help for the Republic is that they raise their corporation tax to a level that may no longer be any kind of a threat for you.”
Mr Peston painted a vivid picture of the scale of economic damage sustained by the Republic through the banking crisis.
“The original rescue was equivalent to something like a quarter of the value of everything the Republic produces. By the time we get to the end of this process, they will have put at risk taxpayers’ money equivalent to something like half GDP.”
He said this would be an astonishing rescue “in terms of the sheer size of it”. It compared with about 7% of UK GDP being invested in saving its own failed banks.
Mr Peston told the audience at Broadcasting House how he had been accused of exaggerating the scale of the economic crisis when banks started losing faith in investments in 2008.