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Business View: We should copy Republic's Budget boost

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Business Editor Margaret Canning

Business Editor Margaret Canning

Business Editor Margaret Canning

Business Editor Margaret Canning

A little bit of disapproval on the world stage goes a long way, as the Republic of Ireland has found out – the hard way.

Yesterday, as predicted, Finance Minister Michael Noonan bowed to months of negative headlines by closing a tax loophole which enabled big international investors, usually based in the US, to shift profits to locations with extra-low tax rates.

As well as employing thousands of people in the Republic, multinationals have been able to place patents and other intellectual property in Irish-registered subsidiaries – managed in cosy tax havens.

Royalty payments could be directed away from one unit to the tax haven– via a second Irish subsidiary – keeping bills as low as 1% or 2%.

Now Noonan's intervention means that companies registered in the Republic will have to be tax-resident – though as with most Budgets, he was able to give with one hand what he was taking away with the other.

Relief on research and development and a new 'knowledge development box' – similar to the UK's patent box – will allow the Republic to retain its attractiveness as a business-friendly location, even without the lure of the Double Irish.

That the south has had to get even more creative with its tax offering has led commentators to point out that Northern Ireland needs to be doing the same.

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Neil Gibson, economic advisor to EY, points out that we should seek to emulate measures such as its new agri-tax when we are asking for new powers from Westminster.

According to EY, that tax will help "unlock" under-used land and provide a boost to the rural economy – something much needed in Northern Ireland.

Mr Gibson says we must think about the specifics instead of the 'broad brush' approach of a cut in corporation tax.

Noonan has also retained the much-envied 9% rate of VAT for tourism activities.

That has followed intense lobbying by the sector – obvious to visitors to any pub, restaurant or hotel in the south in recent times.

And, having been through austerity, the Republic now has the ability to spend – a luxury which will be denied to Northern Ireland for the foreseeable future.


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