Cut in Northern Ireland corporation tax ‘will create 58,000 jobs’
Another new report on reducing Northern Ireland’s level of corporation tax has claimed that pre-announcing the move by next year would help create 58,000 extra jobs by 2030. It also claims 42% of those would come from foreign direct investment.
The Economic Advisory Group’s (EAG) paper ‘Impact Of A Reduced Corporation Tax’ also said the standard of living will improve by £24,500 per person and export sales could rise to £15bn.
The paper forecasts that if no change happens, it will be over a decade before Northern Ireland employment levels recover to their 2008 peak, and that the continuation of the status quo offers “no prospect” for rebalancing the economy.
Only two of the main sectors in the economy here were larger in 2010 than they were in 2007 — health and education, both of which are heavily reliant on public funding.
The group is recommending announcing a reduction in the corporation tax rate to 12.5% next year, in line with that of the Republic of Ireland, that will come into effect in 2014. The EAG, an independent body chaired by Kate Barker — a former member of the Bank of England’s Monetary Policy Committee — has been working on the document for about a year.
“No other single measure will be able to make differences of this scale within this timeframe,” she said. “We cannot underestimate the positive impact this will have.
“Lowering the rate would help communities where there is high levels of poverty.”
Ms Barker said there would be no mechanism put in place to stop companies retaining the savings or paying them back to shareholders as dividends, rather than reinvesting in the economy.
DUP MP Jim Shannon said the Republic's financial bailout has made it “hard to be neighbourly” because it is being used to undercut Northern Ireland.
Mr Shannon accused Dublin of using the cash to disadvantage the province through continuing its lower corporation tax.
Campaigners are calling for the corporation tax rate — the fee businesses pay to trade here — to be slashed from 28% to match that of the Republic, at 12.5%.
The price for this could be a huge cut in the grant from Westminster, which supporters say would in time be matched by increased business activity.
Opponents say firms will hang on to their savings rather than reinvest here.