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Northern Ireland can aim to undercut Republic's 12.5% corporation tax

By Jamie Stinson

Published 09/07/2015

Chancellor Ceorge Osborne outside 11 Downing Street yesterday before outlining his Budget
in the Commons
Chancellor Ceorge Osborne outside 11 Downing Street yesterday before outlining his Budget in the Commons

A cut in UK corporation tax has boosted calls for Stormont to consider undercutting the Republic's rate here in Northern Ireland, business leaders have said.

Stormont should consider bringing in a rate of corporation tax lower than the proposed 12.5% and undercut the Republic, it has been claimed.

It would help make Northern Ireland a more attractive option for investors than Britain or the Republic.

In yesterday's Budget, Chancellor George Osborne revealed a plan to reduce the rate in the UK to 19% in 2017 and 18% in 2020 from the current level of 20%.

The reduction in the rate nationally means the cost of devolving corporation tax to Northern Ireland could fall by as much as a third, it has been claimed.

In Mr Osborne's seventh Budget, and the first wholly Conservative one since 1996, he continued on the road to austerity, but at a slower pace than was expected.

With the Chancellor's surprise announcement that the UK's rate of corporation tax will fall to 18%,the business community in Northern Ireland has now called for the devolved rate to be reduced lower than 12.5%.

Previously the Treasury estimated Northern Ireland would see a cut of £300m in the block grant if it introduced a 12.5% rate, while the UK rate was 20%. Now this could be cut by a third as a result of the Chancellor's decision.

It has been expected that Northern Ireland would follow the Republic of Ireland and introduce a corporation tax rate of 12.5%, but a rate and a date of introduction have yet to be confirmed due to the breakdown at Stormont over welfare reform.

Eamonn Donaghy, of corporation tax lobby group Grow NI, said it provided the argument to go even lower.

"In theory with a lower rate in the UK you could go to a lower rate in Northern Ireland, as the cost in doing so has been reduced."

Ann McGregor, chief executive of Northern Ireland Chamber of Commerce, said: "Although the cutting of UK corporation tax is welcomed, Northern Ireland could now consider implementing an even lower rate (for example 10%), which would put Northern Ireland at a competitive advantage over the Republic."

Michael Blair, partner at RSM McClure Watters said he would welcome a lower tax rate.

"The reduction in the main rate of corporation tax will be a dent in the attractiveness of a 12.5% rate in Northern Ireland but a move to reduce the Northern Ireland rate below the Republic of Ireland rate would certainly be welcome."

Dr Esmond Birnie, PwC chief economist in Northern Ireland, said the UK lowering the rate of corporation tax reduced the advantage Northern Ireland would have if it remained at 20%.

"Taking corporation tax down to 19% by 2017 and 18% in 2020 will significantly reduce the potential impact of a 12.5% rate in Northern Ireland," he said.

"However, it will also reduce the cost to the block grant, which the Government has estimated as £300m annually."

Nigel Smyth, CBI Northern Ireland director, said the lower rate in England would mean the cost to Northern Ireland would fall by tens of millions.

Meanwhile, it was a mixed bag for drivers as the Chancellor continued his policy of freezing fuel duty, but brought in new car tax bands, with a standard charge of £140.

Maintenance grants for students going to university which have a family income of £42,000 will be converted into loans from the 2016/17 academic year.

The tax-free personal allowance will rise to £11,000 next year and the level before the higher rate of tax is charged will increase to £43,000.

Mr Osborne announced an increase in the insurance premium tax from 6% to 9.5% this November, which insurers warned will lead to higher policies.

Despite the biggest changes to pensions in a generation being introduced last April, the Chancellor announced a consultation will be launched to look at the possibility of whether the retirement product could work more like a tax-free Isa.

And in response to the Budget, Finance Minister Arlene Foster said: "The Budget clearly reflects the UK Government's policy aspirations and should not come as a surprise.

"It is now time for the Executive to face the reality of the financial context and agree a way forward on the local implementation of welfare reform, protecting the most vulnerable without crippling public services."


The current level of corporation tax across the United Kingdom


What the UK's corporation tax rate will fall to by 2020


The cost of introducing a corporation tax cut to NI before the Budget


What cutting corporation tax to 12.5% would not cost Northern Ireland

Belfast Telegraph

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