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Paterson in favour of tax rate control

Giving Stormont the right to set the rate of corporation tax could provide Northern Ireland with a major weapon in the fight to create jobs, the Secretary of State has said.

Finance Minister Sammy Wilson fears that under European rulings, if the Executive takes on the tax-raising control it will be obliged to lose £300m of its Westminster block grant.

But Secretary of State Owen Paterson has now asked local ministers to consider the wider benefits of what he believes could be a "massive marketing tool" to attract overseas investment.

Lobbyists who want Northern Ireland's 28% corporation tax rate cut to compete with the Republic of Ireland's famously low level of 12.5% have argued the measure could be phased in to ease any burden until Stormont begins to see a return on the tax change.

They have also argued that in a climate where cash from London is likely to be cut anyway, and when European Commission negotiations threaten to weaken Northern Ireland's ability to offer grants to new businesses by 2013, the region badly needs a new economic tool.

Mr Paterson said: "My hope is that people would see this as an opportunity to invest for the future. This would be a massive marketing tool. We could say: Come to Northern Ireland, we've got one of the lowest rates in Western Europe."

Executive ministers are studying a Treasury paper on how the tax change could be handled.

Mr Paterson said: "The basic facts are, if we can get this through, and we've got to persuade the Treasury and we've got to persuade the European Commission, so we have got quite a long way to go on this, but bluntly, we won't get there if we don't have enthusiasm from Northern Ireland."

He added that if the tax control was devolved to Stormont, the Northern Ireland Assembly would reap any of the financial benefits.

"If, as I foresee it, we give the Stormont Assembly and Executive the power to set corporation tax, they then have the responsibility of collecting that tax and spending it. That tax stays in Northern Ireland.

"If they reduce corporation tax, our prediction, following the direct experience of the Republic of Ireland and the recent experience of Canada, is that where there has been a dramatic reduction in corporation tax, there has been an increase in revenue."