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Finance Minister committed to devolution of corporation tax powers to Belfast

Published 04/07/2016

Mairtin O Muilleoir pledged to push ahead with the planned transfer of fiscal powers from London
Mairtin O Muilleoir pledged to push ahead with the planned transfer of fiscal powers from London

Stormont's Finance Minister has said he remains committed to the devolution of corporation tax powers to Belfast, despite the Chancellor's indication that the UK rate could be slashed to less than 15%.

In a statement issued in response to George Osborne's remarks, Mairtin O Muilleoir pledged to push ahead with the planned transfer of fiscal powers from London, but he did not confirm whether a regional rate of 12.5% was still envisaged.

The key factors behind reducing the regional tax on profits generated by big businesses to 12.5% - the same as the Republic of Ireland - was to allow Northern Ireland to compete on a level playing field with its neighbour and to give it a distinct advantage over the rest of the UK, by significantly undercutting the nationwide 20% rate.

The likely multimillion pound shortfall in tax take would have been sliced off Stormont's annual funding from the Treasury.

If Mr Osborne proceeds to cut the UK rate to below 15% - to counter investment uncertainty in the wake of the EU referendum result - the differential with a Northern Ireland rate of 12.5% would be drastically reduced, thus arguably diluting the financial lure of investing in the region.

Sinn Fein's Mr O Muilleoir said he would explore the Chancellor's proposal with him in forthcoming face-to-face negotiations.

"It is my intention to bring a report to the Executive on the corporation tax options post-EU referendum and following the latest announcement," he said.

"I remain committed to devolving corporation tax powers from London.

"There has been a dramatic change in circumstances since the referendum but it remains my contention that we can do a better job for our people with the devolution of more fiscal powers. Of course, access to the European market and free cross-border trade are essential to our future."

Prior to the EU referendum, the Stormont Executive was on course to take control of setting its own levy on businesses' profits from 2018. It was a key plank of its job creation strategy.

The outcome of the referendum has challenged a number of the Executive's assumptions.

Not only has it prompted the likelihood of a significant rate cut in the rest of the UK, it has also created uncertainty over off-setting the rate reduction with a cut in public funding.

With the need to balance up the tax shortfall a requirement under EU law, the Democratic Unionists have claimed such a hit to the block grant would not be necessary post-Brexit. However, that argument has been rebuffed by Northern Ireland Secretary Theresa Villiers, who insists the terms of the devolution deal with the Treasury have not altered.

The Ulster Unionists have called for Stormont's economy committee to be recalled during the summer recess to monitor "Brexit implications".

The Opposition party's economy spokesman Steve Aiken said: "Things are moving extremely quickly at the moment with Chancellor George Osborne's plan to slash corporation tax to less than 15% contrasting with the dithering and uncertainly of the Stormont Executive on this key element of attracting foreign direct investment.

"Therefore, I simply do not think it is good enough to effectively shut up shop at Stormont for the two months of the summer recess, and pick things up when the Assembly reconvenes in early September."

On other financial matters, Mr O Muilleoir welcomed Mr Osborne's announcement last week that a target of restoring the UK's books to a surplus by 2020 had been dropped.

But he said there was still uncertainty about what that meant for the Executive's block grant going forward.

"I will, with my Scottish and Welsh colleagues, be urging the Chancellor not to inflict further reductions on the executive's already constrained budget," he said.

"It is clear that we will have to develop our own stimulus package for the North and I have already started discussions in that regard with officials."

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