Rise in Republic taxes may boost NI economy
The Northern Ireland economy could get a significant boost if the Republic is forced to accept proposals to harmonise corporation tax and introduce a tax on financial transactions across the eurozone.
The Association of Chartered Certified Accountants (ACCA) said the local economy - long in the shadow of the Republic's lower corporation tax - could attract financial services firms from south of the border and win the fight for fresh foreign direct investment if the European Union's proposals are pushed through.
"If the Financial Transaction Tax (FTT) was to be imposed upon the Republic the south's pain could potentially be the north's gain," the ACCA's Head of Taxation Chas Roy-Chowdhury said. "Without an FTT and a more comparative corporation tax rate the competitive dynamic on the island could start to shift north."
Corporation tax in the Republic stands at 12.5% compared to 26% in Northern Ireland but proposals emerged at the recent EU summit in Brussels for a flat rate across the European countries which use the euro.
Corporation tax in France stands at 33% and at 15% in Germany so it's expected that any harmonisation would be well above 12.5%. The Irish government has already stated it won't budge on the issue and claims it is successfully using other means to reduce its budget deficit.
But its hand may be forced by the EU which, along with the International Monetary Fund, has recently bailed the region out.
Meanwhile, the FTT has been mooted at the meetings of EU leaders to try and dampen speculative activity on financial markets and to raise revenue.
"Our view is this would be a tax on jobs and economic activity and as it would be applied to the same transaction multiple times it would result in financial institutions in particular and businesses in general avoiding the European Union," Mr Roy-Chowdhury said.
"Whilst agreement will be hard to come by, should there be the imposition of a eurozone FTT, the ACCA believes these taxes would be extremely unpopular in Ireland and could result in the financial sector migrating north of the border," he added.
The Republic's corporation tax rate compared to 26% in Northern Ireland