Make your voice heard on corporation tax, urges Paterson
A stark warning has gone out that unless the people of Northern Ireland make their voices heard within the next two weeks the golden opportunity for a lower rate of corporation tax could be lost.
It has emerged that there has been a disappointing response in “the low three figures” to the HM Treasury public consultation on ‘Rebalancing the Northern Ireland Economy’.
As it stands, it would be unlikely legislation will be changed to allow the Stormont Assembly to drop corporation tax from 26% to 12.5%, as it is in the Republic.
Secretary of State Owen Paterson again issued an impassioned plea at a breakfast event of business leaders to make their voices heard. “We have to do something radical to galvanise the private sector,” he said.
“Lowering the rate of corporation tax could float wealth right across Northern Ireland.
“I need a resounding mandate from the people of Northern Ireland to make this case at Westminster, so I encourage you all to write to the Treasury to make your voice heard.”
It emerged last week that the enterprise, trade and investment committee at Stormont had not yet responded to the consultation ahead of the initial closing date of June 24. However, the deadline has now been extended until July 1.
Danny Moore, principal at Loughshore Investments, which gives funding to start-up businesses, said that lowering the levy would be a “game changer” for Northern Ireland and a “once in a lifetime opportunity” to transform the economy. He has urged firms here not to ignore the issue and said that they could benefit just as much, if not more, than foreign investors.
“People are focusing on foreign direct investment, but lowering corporation tax will boost indigenous businesses too,” he said.
“Businesses will be able to retain profits and grow faster, reinvesting in their technology and people instead of relying on grants.
“The export market from Northern Ireland would also be boosted — indigenous businesses could benefit even more than new firms coming into Northern Ireland.”
But Professor Michael Moore, from the School of Finance and Economics at Queen’s University in Belfast, said that the price is too high.
“When the Republic first introduced its lower rate of corporation tax in the late 1950s it took a decade-and-a-half before it developed a competitive edge with Northern Ireland,” he said.
“If we cut corporation tax and do nothing else, then it will take a long time to make it worth the investment it will cost.”
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Corporation tax is the tax paid by companies on their profits. Currently larger businesses in Northern Ireland pay the main rate of 26%. The rate is to be cut UK-wide to 23% by 2014, as announced by the Chancellor in the Budget. Supporters of a cut in the rate say lowering the levy to match or better that of the Republic, set at 12.5%, would make Northern Ireland more competitive and will attract more jobs through foreign direct investment.
A power shift that will rev up economy
By Brendan Morris
The power to set corporation tax rates is an exciting opportunity. Ownership of a key economic lever would be an ‘early win' for the new Executive and could be seen as an indicator of its increasing autonomy and stability.
A big rate cut could send a message that we see ourselves becoming a more entrepreneurial society with the private sector making up a growing share of our economy.
As the shop window for a wider package of enterprise-friendly measures, it could help grab the attention of the international business community.
As I've said in previous articles in this series, it is not a one-way bet. Alongside the loss of revenue for the Executive (we still need to know the corporation tax figures to assess the economics), there is an additional administrative burden.
A change in the rate would be simple for a company operating solely in Northern Ireland, but one operating across the UK would have to spend time calculating the profits earned in Northern Ireland. Then HMRC may wish to police the split closely, to make sure businesses are not wrongly assigning profits to Northern Ireland, rather than the rest of the UK, to save money.
Although driven by economics, the devolution of tax rates has political implications.
It alters the balance of power between Westminster and Stormont (and indeed Westminster and the other devolved bodies, as anything Stormont gets, Holyrood and Cardiff Bay are likely to demand). For ministers at Westminster, deciding whether to grant this additional power is likely to weigh as heavily as the economic considerations.
Brendan Morris is Chairman of the Chartered Institute of Taxation, Northern Ireland branch