Fight for jobs as Northern Ireland to slash corporation tax to match Republic
Stormont wins power to match Republic’s 12.5% rate on business profits from 2018
Northern Ireland is to slash its corporation tax rate to 12.5% in a move that will put the region in direct competition with the Republic for inward investment and jobs.
Political leaders in Belfast have been handed the power to cut the rate of tax businesses pay on their profits from 2018.
The deal surrounding corporation tax was secured as part of the Stormont House Agreement, which has brought an end to the long-running political impasse that pushed power-sharing to the brink.
The document, signed following months of intense negotiations, paves the way for a full devolution of corporate tax power by 2018. The rate is currently 20%, which campaigners say puts Northern Ireland at a distinct disadvantage to Ireland.
As recently as last week, Taoiseach Enda Kenny emphasised the importance of the 12.5pc rate to the Irish economy.
But Tuesday’s decision will spark fears in the Republic that multinational firms will instead choose the Northern Ireland as a location for investment and job creation.
Irish government sources have played down the significance of the move and said the Republic would respond accordingly to increased competition.
"And we continue to win new investments and jobs," the source said.
The agreement has settled a long-running wrangle over welfare cuts in Northern Ireland and set up ways to rid the border area of paramilitaries.
A new panel is to be set up to examine the ongoing problem of paramilitarism on the back of the brutal IRA murder of Kevin McGuigan.
To the anger of victims' campaigners, the deal entitled 'A Fresh Start: the Stormont House Agreement and Implementation Plan' does not include new mechanisms to tackle the legacy of the conflict.
But the decision to allow the Northern Assembly to bring the corporation tax rate in line with the Republic will put the Coalition on alert.
Under the agreement, the Stormont finances will be topped up by an additional £500m from London to tackle issues "unique to Northern Ireland" such as the removal of so-called "peace walls", 15-metre-high 'fences' that separate some communities.
Northern Ireland will retain the most generous social welfare system in the UK by diverting funds from elsewhere, the deal says.
Northern Secretary Theresa Villiers confirmed that the way would be cleared for the corporation tax rate to be cut to 12.5pc by 2018.
Invest Northern Ireland chief executive Alastair Hamilton said slashing the rate could make Northern Ireland "the most attractive" location in Europe for investors "based on a combination of tax, talent and value".
Professor Neil Gibson, director of the Ulster University Economic Policy Centre, said the corporate tax agreement was "hugely significant" for both Northern Ireland and the Republic of Ireland.
"It is a significant deal for a number of reasons," said Professor Gibson.
"It will lead to increased competition across the whole island and increased competition for Foreign Direct Investment which Northern Ireland already has a good record in attracting.
"The island could become very attractive to overseas investors who may wish to exploit the opportunity of euro and sterling bases in the one location. Arguably the greatest significance is the message Northern Ireland sends out to the world, that as well as peace, we have secured a major economic policy."
Prof Gibson said the deal gave huge responsibilities as well as huge powers to the Stormont executive.
He pointed out that the agreement also had implications for devolution in the UK following the recent Scottish Referendum and demands by UK regions for devolved tax and other powers.
The UK is set to drop its corporate tax rate from 20pc to 18pc, but Northern Ireland's will be significantly lower at 12.5pc.
"This is the very modern face of devolution," said Prof Gibson who added that the deal may increase pressure on Prime Minister David Cameron to extend tax devolution to other regions.
CBI Northern Ireland, which is a business lobbying group, said the move could rejuvenate the economy north of the Border, as it will provide a key ingredient to energise the private sector and create tens of thousands of new jobs, thereby transforming its economy.
CBI welcomes new deal
The Confederation of British Industry (CBI) Northern Ireland chair, Colin Walsh, has given an initial response to the announcement of a new political deal for Northern Ireland.
Mr Walsh said: "The CBI and the wider business community welcomes the announcement of a new comprehensive political deal that promises to resolve the long standing political instability that has had a detrimental impact on our economic recovery.
"The recent spate of job losses has demonstrated that the economy, now more than ever, needs political stability with a clear vision, leadership and commitment across the Executive.
"CBI has been clear that Northern Ireland can prosper under devolution. This new deal must ensure there is a fully functioning Executive which can deliver good government and make decisions in the best interests of Northern Ireland’s future prosperity and all its citizens. I hope this deal will ensure we have brought an end to the series of standoffs and showdowns. The prize of success is tremendous and the opportunities enormous.
"I would like to congratulate the First Minister and the deputy First Minister, all their political representatives as well as the other participating parties both locally, nationally and internationally on the significant efforts they have put in to reach this much needed agreement.”
"The business community welcomes the NI Executive’s commitment to introduce a 12.5% corporation tax rate in April 2018. This announcement will undoubtedly provide a key ingredient to energise the private sector as well as attracting a new generation of inward investment businesses thereby creating tens of thousands of new jobs and boost prosperity for all, and transform our economic prospects.
"We also welcome the commitments to proceed with the construction of key transport road projects, including the completion of the A5 by 2019, with the financial support of the Irish government. The additional £500m commitment from the UK government and additional financial flexibilities are also clearly a welcome step forward and recognition of our unique challenges.”
"It is now vitally important that the commitments in this Agreement are delivered by all the parties."
PwC Tax partner Martin Fleetwood said: "Under today's agreement, the Executive commits to reduce the Northern Ireland rate of corporation tax to 12.5% from April 2018 and the business community will welcome that clarity and commitment.
"It will permit Invest Northern Ireland to begin promoting the lower rate in its marketing efforts and encourage companies to ensure that they are compliant."
NIIRTA welcomes fresh start agreement
The Northern Ireland Independent Retail Trade Association (NIIRTA) has welcomed the Fresh Start Stormont Agreement.
NIIRTA Chief Executive Glyn Roberts said: "Political stability is the bottom line for sustainable economic development and so we welcome this agreement as a roadmap in moving forward both the institutions and our economy.
"We hope that it will have widest possible agreement across the political parties. It is not for us to comment on the politics of this agreement, but it is important for us to give our views on the economic aspects of it.
"At long last we have the date and rate for Corporation Tax of April 2018. It is crucial that this timetable is maintained.
"The scourge of Paramilitarism continues to be a problem for our members and our economy and we welcome the proposed Joint Agency Task Force to tackle this vital issue.
"It is positive that a new Independent Fiscal Council for Northern Ireland will be established to provide objective assessments on the NI Executive future budgets.
"A commencement date for the A5 and progress on the North-West Gateway are welcome boosts for the infrastructure of our towns west of the Bann."
Chartered Accountants Ulster Society welcomes 'Fresh Start'
Chartered Accountants Ulster Society, which represents 3,800 members throughout Northern Ireland has welcomed the announcement of the ‘Fresh Start’ Agreement at Stormont.
Patrick Gallen, Chairman of the Ulster Society said: “The ‘Fresh Start’ is tremendous news for Northern Ireland and we hope that this can be the beginning of a new era of co-operation which provides a basis for a better future for all in Northern Ireland.
“The deal gives our politicians the platform to put Northern Ireland’s finances on a sustainable footing and is a significant step towards securing a normalisation of our politics and society. We hope that this will bring an end to the ‘stop-start’ political progress of recent years.
“As an organisation which has campaigned for a long time for the benefits that a cut in the rate of Corporation Tax can bring to Northern Ireland, we are particularly pleased that a date and a rate for implementation have been agreed.”
Chartered Accountants Ireland, which represents 24,000 members across the island of Ireland and overseas also welcomed the Agreement. The Institute’s President, Tony Nicholl who lives and works in Belfast said: “A competitive corporation tax rate is a strong incentive which will encourage more foreign investment into Northern Ireland, although we must back that up with investment in skills and infrastructure.
“Political stability and confidence is also critical. I firmly believe that there is a need for this Fresh Start Agreement to be the last of the fresh starts presented by our politicians. The instability of the political sphere has been one of many inhibitors to inward investment. Realisation of the advantage of a competitive corporate tax rate requires stability and economic politics from Stormont.
“Foreign Direct Investment is critical if we are to secure growth, jobs and prosperity for the people of Northern Ireland. The announcement of a date and rate for Corporation Tax is a clear message that Northern Ireland is committed to being a great place for companies to come and do business.”