Belfast Telegraph

Villiers offers reassurance on tax

Northern Ireland will remain just as attractive a location for Game Of Thrones and other productions when new tax powers are devolved, Theresa Villiers has said.

The Stormont Assembly will be allowed to set the corporation tax for Northern Ireland should the Government's proposals become law.

Northern Ireland Secretary Ms Villiers told the Commons the change would provide a "powerful economy lever to drive potential growth" as the country seeks to compete for investment with the Republic of Ireland.

The UK-wide rate will be unified at 20% from April although the Republic of Ireland offers a rate of 12.5% to firms.

While outlining the details of the power to be devolved in the Coporation Tax (Northern Ireland) Bill, Ms Villiers said: "The legislation does not cut off Northern Ireland from the rest of the UK tax system or establish a separate and distinct corporation tax regime for Northern Ireland.

"Control over what is taxed remains a matter for the UK Government and this House. The Bill only devolves the power to vary the rate.

"So Northern Ireland's trading regime remains firmly and clearly within the overall UK corporation tax system."

She went on: "Allowances and credits will remain reserved to Westminster to help maintain a common tax base across the United Kingdom and to prevent unnecessary new complexity from being added to the tax system.

"But a number of rules will be amended to reflect the new circumstances.

"For example, if there's a lower rate of tax in Northern Ireland then R&D tax credits, capital allowances and creative reliefs for the film, TV, computer game industries will be adjusted to ensure that they continue to be broadly equivalent in value to Great Britain.

"So that means Northern Ireland can continue to be just as attractive as a location for successful projects like Game of Thrones and other film and television productions."

Shadow Northern Ireland secretary Ivan Lewis said Labour would help pass the Bill before the election.

But he said the Opposition continued to have concerns about the impact of the reform.

He said: "We accept the devolution and subsequently a reduction in corporation tax could play an important part in boosting private sector investment in Northern Ireland, alongside a range of other measures.

"(But) the idea the devolution of corporation tax is a panacea is fundamental mistake.

"Should Northern Ireland reduce corporation tax rates to the level of the Republic of Ireland, they would lose at least £300 million from their block grant. Budgets would have to be cut and in the awful event of the Tories being re-elected, this £300 million would substantially increase as a result of the promised return to 1930s levels of public expenditure.

"Slashing and burning the state rather than a long-term plan to rebalance the economy is opposed by all of Northern Ireland's parties.

"In enabling the passage of this Bill, we do so in a spirit of transparency about the potential gains but also with a sense of awareness of the risks."

Former Northern Ireland secretary Owen Paterson said: "I think this is a day we will remember. This is the equivalent, long term, in benefit terms, of what the last government did with the Belfast Agreement.

"This could really help bring long-term prosperity and bring the wealth... to some of those very, very disadvantaged communities."

The DUP's Treasury spokesman Sammy Wilson said a lower corporation tax rate would bring benefits to Northern Ireland as the Republic of Ireland has successfully used it as a "shock and awe" tactic to attract business.

He said that even when the Irish government was forced by the financial crash to bring in tough austerity policies, the only area left untouched was its corporation tax rate.

Acknowledging that lowering the rate could pose problems for Northern Ireland's large public sector due to lower tax receipts, he said the experience of the neighbouring Republic was a "significant argument" in favour of it.

Mr Wilson said: "For those who say that this will not have a beneficial effect, it is significant that even at a time when the government of the Irish Republic was having to slice public expenditure, was having to incur the wrath of the population by reducing wages in the public sector, by putting up taxes, by introducing new charges for water etc, the one area which they were fiscally responsible for that they did not make any change in was the area of corporation tax.

"Because they had obviously made the judgement that albeit along with other measures, corporation tax was something which when it came to going out and fighting for business was a shock and awe tactic which they could use to try and attract businesses to the Irish Republic.

"I think that that is quite a significant argument."

The SDLP's Treasury spokesman Mark Durkan said his party had raised the issue of corporation tax in the negotiations leading up to the Good Friday Agreement.

Had it been taken up earlier, he added, Northern Ireland would have been further down the road and already enjoying the benefits that setting the rate can bring.

He stressed corporation tax was not a "silver or magic bullet" and said it was important to look at other policy measures as well.

Liberal Democrat Ian Swales (Redcar), speaking for the first time on Northern Ireland, paid tribute to Mo Mowlam, who used to represent his seat.

He told the House the introduction of the corporation tax proposal could turn out to be "quite complex" when considered alongside other existing proposals.

He also pointed out that Northern Ireland could attract more investment from the rest of the UK as a result which would otherwise have been invested elsewhere.

Alliance Party MP Naomi Long (Belfast East) said corporation tax was "only one of a number of avenues" to pursue to grow the private sector.

She said: "A low rate of corporation tax alone will not attract all of the investment needed to grow Northern Ireland's economy. There are other corresponding measures which will need to be taken in order to make Northern Ireland an attractive place to place a business or a company."

First and foremost, she said, were issues around stability and good governance.

She said: "I want to see local parties actually commit to dealing with those issues which are politically sensitive and dealing with them in a mature way, so that we don't have the kind of situation we have had over recent years where lots of years of going out, talking to companies, encouraging them to come to Northern Ireland to consider us as an inward investment opportunity are written off on the basis of a few nights of rioting, which is then projected worldwide and damages our reputation irrevocably."

Ms Long also raised the issues of infrastructure and planning with the need for reform, plus connectivity and the unresolved issue of Heathrow expansion.

She said: "We are reliant on air transport and unless the situation at Heathrow is resolved - because it is the main cargo hub for the UK and is the main cargo export point for goods and services going from Northern Ireland - unless that is resolved as a matter of urgency, no amount of reduction in corporation tax will encourage people to invest in Northern Ireland."

Tory Nigel Mills (Amber Valley), a Northern Ireland Affairs Committee member, said: "I welcome the principle, I have some concerns over rushing this through at this stage without thinking about how we do it for the UK as a whole so we get a long-term sustainable tax system.

"I have some concerns over how cluttered we will make our corporation tax system and actually whether, in the detail of this, there are some things that might make this not work how we would like it to work, but I would suggest that a committee stage is perhaps the right place to think through those issues."

David Gauke, Financial Secretary to the Treasury, pondered if Labour was seeking to position itself to the "left of Sinn Fein" by wishing to increase the rate of corporation tax across the UK.

Shadow Treasury minister Shabana Mahmood replied: "You are well aware our manifesto commitment is to raise the headline rate of corporation tax from 20% to 21% in order to spend every single penny of that money to put towards a cut in business rates and then a freeze in business rates, which will benefit primarily small and medium-sized businesses."

Answering concerns from MPs, Mr Gauke said it was absolutely right not to view the corporation tax powers as a "silver bullet".

The Bill received an unopposed second reading.

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