Campaigners for a cut in the rate of corporation tax in Northern Ireland rounded yesterday on a Treasury minister who had played down the prospects of change.
Sir George Quigley, chairman of the Industrial Task Force, said that despite the comments of Dawn Primarolo, the issue was far from being settled.
Ms Primarolo, the Paymaster General, had said in a written answer that cutting the tax rate in Northern Ireland would distort competition and fall foul of European law.
Sir George responded by saying: "The dialogue with the Treasury has only just begun and there is nothing in the minister's reply which could not be successfully challenged as the dialogue proceeds."
Sir George said Ms Primarolo was incorrect in suggesting that the so-called Azores case meant that the EU would veto a cut in corporation tax in Northern Ireland.
He said: "Contrary to what she says, the Azores case did not make tax variation within a state illegal, but set out the circumstances in which it could be brought about.
"Her other points relate to potential manipulation and abuse. There are ways of preventing this and it would simply be a matter of introducing efficient means to that end."
Sir George accused the Treasury of seeking to evade the key issue, which was the distorting effect which the far lower rate of corporation tax in operation in the Republic was having on the Northern Ireland economy.
He added: "This arrangement works very much to Northern Ireland's disadvantage and needs to be urgently addressed."
In a written answer to David Anderson, of the NI Select Committee, Ms Primarolo said that reducing corporation tax would place a "significant administrative burden" on both the Government and companies.
Ms Primarolo, the Paymaster General, said it would be difficult to determine exactly what proportion of a company's profits were generated in Northern Ireland if it also traded in Britain.
She said: "Many companies trade in different regimes of the UK. It would not be easy to determine the proportion of their profits liable at a 'devolved' rate.
"In addition, such a measure could also create opportunities for some companies to manipulate the rules in order to benefit from the lower rate.
"This may well result in a system that would place a significant administrative burden on both businesses and the Government."