Belfast Telegraph

Friday 18 April 2014

Taxing time as future of our economy is decided

Liam Clarke

The decision on whether or not to devolve corporation tax to Northern Ireland is the biggest decision the Executive has had to negotiate since the devolution of policing and justice.

Policing and justice was the deal which got the Robinson/McGuinness relationship on to a firm footing and getting corporation tax right is an even tougher challenge for them.

The move is attractive to the two big parties for different ideological reasons. The DUP - projecting itself as a centre-Right party of business - wants to stimulate investment, cut taxes and strengthen the private sector.

They see it as a stepping stone to an entrepreneurial culture with tax and the public sector generally trimmed back.

For Sinn Fein, it is not just about money; it is also part of an all-island agenda.

The business tax is currently charged at 26% in the UK, although there are plans to reduce it, and 12.5% in the Republic.

Looked at through republican eyes, breaking the link with the UK rate and moving into line with the Republic is a move in the direction of an all-Ireland economy.

They also favour joining the euro and bringing other taxes into line.

London has its own agenda, too. However much Owen Paterson may say it is not in the bag, the Tories like the idea because they see it as a way of reducing our economic dependence on subventions from the Treasury.

It is seen as a parting gift, to be given at the best possible price to central Government, to help us stand on our own two feet and, if we fall over, we bear part of the cost ourselves. George Osborne, the Chancellor, may flesh this out when he visits the province later this week.

Corporation tax reduction is welcomed by the indigenous business community for obvious reasons. It will gain no matter what the implications are in terms of cuts to the block grant, reduced services, or tax increases in other areas to meet any shortfall.

The peace and political processes move forward like that; different people agree to do the same thing for different reasons and it is a model which has served us well so far. Don't knock it.

As citizens, we also have to watch our own interests and we should all make our views clear in response to the consultation exercise which has been extended until July 1.

Sammy Wilson, the Finance Minister, has adopted a nuanced approach. He wants the deal, but he also wants it at the right price. As he recently told a business meeting at Stormont, it all depends on the cost. In return for the powers to raise the tax locally and keep the revenue, an amount will be deducted from our £12bn-a-year subvention from Westminster. Estimates of the cost vary between £200m and £385m a year. It makes a big difference which figure is chosen.

Projected savings to London on social security bills and national insurance costs here could reduce the cost to us.

We need to write in with our submissions, saying that we want the power to make the change, but we want the terms carefully negotiated before it actually happens.

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