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Corporation tax figures differ widely, says report

The Treasury's figures for the amount of Corporation Tax receipts arising in Northern Ireland differ significantly from estimates published by the Department of Finance and Personnel last year, a report has said.

Assembly researcher Colin Pidgeon outlined some of his findings on the issue of lowering the Corporation Tax rate to the Assembly committee of Finance and Personnel ahead of the Prime Minister's visit yesterday.

He also noted that some of the broader issues surrounding devolution, including ethics and devolved-national government relations, have not, as yet, featured widely in the debate.

"Some possible costs to Northern Ireland have not been estimated - possible administration costs for HMRC, or of Northern Ireland developing its own policy and enforcement capacity, for example - but these could potentially be significant," he said.

He also warned that while two of the three tests set out in European law under the Azores judgment for the legality of devolution of tax powers can be met, it is not yet possible to assess whether the third test might be met.

The question relates to whether any change in Corporation Tax rates would be acceptable to other member states under the Code of Conduct on harmful tax measures. He added that in its 'Rebalancing the Northern Ireland Economy' consultation paper, the "assumptions" made by the Treasury about the proportion of UK corporate tax revenue that arises in Northern Ireland are very different from those presented by the Department for Finance and Personnel (DFP) last year.

"If the figure suggested by DFP is accurate, the direct cost to the Northern Ireland block grant could be in excess of £400m by year five.

"The two estimates presented by the Treasury puts it in the range of £225-270m by that year."

He also referred to the "elephant in the room" - what might happen if tax powers were devolved, and if devolution was then suspended for any reason. Mr Pidgeon said the Treasury paper does not address mechanisms for adjusting the block grant.

Members of the committee - which has not yet submitted a response to the consultation exercise, which closes on June 24 - agreed to look into the report in depth and report back next week. £400m

Cost to Northern Ireland block grant by year five, according to DFP figures