Belfast Telegraph

Joint calls for Stormont tax powers

Despite their many differences, Northern Ireland's main parties were united in calling for corporation tax powers to be devolved to Belfast to boost the economy.

The powersharing administration at Stormont wants to reduce its rate, a levy on business profits, from the UK-wide 21% to match the 12.5% tax rate in the Republic of Ireland, which is among of the lowest in Europe and a competitor for foreign direct investment.

The move is likely to cost more than £200 million a year, which must come from the Assembly's budget without subsidy from London, according to EU rules.

But business organisations like the CBI have backed the move as a powerful incentive for economic growth and the creation of highly skilled jobs.

The Treasury postponed its decision until after the Scottish referendum amid calls for Scotland to be given similar responsibilities.

Recently Scottish First Minister Nicola Sturgeon insisted if Northern Ireland received the powers "then there is no argument that says it shouldn't also be devolved to Scotland".

Stormont First Minister Peter Robinson had written to Prime Minister David Cameron requesting the "swift" devolution of the responsibilities and assured the Treasury that the ministerial Executive was united on the matter.

However, he said, even if successful, devolution was unlikely to be up and running before late 2016 or early 2017 because of considerable procurement issues including the purchase of an IT system.

He also said all available office space had been "soaked up" and called for the planning department and developers "to up their game" to ensure adequate facilities for any potential new investors.

Leading businessman Bro McFerran, managing director of insurance company All State NI, recently questioned the ability of politicians to deliver a lowering of the rate for Northern Ireland.

Local representatives are at loggerheads over introducing welfare reforms imposed by London which critics say would hurt the most vulnerable.

More long-standing divisions surround contentious parades, flags and dealing with the conflict legacy of thousands of deaths.

Any cut in corporation tax would be intended to tackle long-term problems in the Northern Ireland economy.

The private sector is too small, as acknowledged in a "pact" between Westminster and Stormont designed to encourage growth in the sector. Studies show that wages are low, productivity poor and the level of exports low, as recently highlighted by jobs agency Invest NI.

Advocates of a business tax cut, including Stormont enterprise minister Arlene Foster, have said it could attract many more big multinational investors in a way the Republic of Ireland has with its 12.5% rate.

They said jobs will be higher value and higher paying than those currently being created.

Work done in 2011 by Stormont's Economic Advisory Group (EAG) estimated that it would create an additional 4,500 jobs a year in the long term and mean that by 2030, the economy will be about 14% bigger than it would be if the tax is not cut.

However, a reduction in corporation tax would mean less revenue is collected for the Treasury.

The rules mean that Stormont would therefore have to hand back a chunk of its annual budget funded by the Treasury to make up for that, a choice former finance minister Sammy Wilson has urged ministers to think carefully about.

It is also unclear whether reducing the rate in line with the headline rate in the Republic would be as effective as its champions claimed.

Major multi-nationals like Apple have been criticised for how they use tax rules in the US and Ireland to avoid paying high duties. The firm last year confirmed that two of its Irish subsidiaries paid around 2% in tax, far below the headline rate in any part of Ireland or the UK.

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