Belfast Telegraph

Dangers of handing corporation tax powers to Stormont

By Samuel Morrison

For years there have been calls to devolve corporation tax to Northern Ireland.

The discussion has been very one sided with the supposed benefits played up constantly while little if any attention has been paid to the very real dangers of handing this power over to Stormont.

It is contradictory for the local parties to complain about cuts to the block grant – the money Northern Ireland receives from Westminster – and at the same time campaign for the devolution of corporation tax as under EU law any cut in corporation tax will mean a corresponding cut to the block grant.

According to figures in a Treasury consultation in 2011 this would amount to a cut of £110 million, £235 million, £265 million, £265 million and £270 million in each of the first five years in which there was a 1.5% reduction in the rate of corporation tax in Northern Ireland.

Our own Department of Finance and Personnel estimated that the direct cost to the block grant could be in excess of £400 million by year five.

A Price Waterhouse Cooper report has cited survey evidence shows that the level of corporate taxation and labour costs appear to be of less importance than other non-tax factors.

On the other side of the coin Northern Ireland will have to bear the cost of a cut to its block grant meaning even less money for our schools and hospitals at a time when they are already having to deal with significant fiscal pressures.

Simply put a cut in corporation tax has very certain costs for Northern Ireland and very uncertain gains.

Small wonder that the Silk Commission into further devolution to Wales recommended in 2012 that corporation tax should not be devolved to Cardiff “as the costs would outweigh the benefits”.

The Welsh government shared this analysis telling the Commission that while the “devolution of corporation tax could offer the Welsh Government a powerful tool to promote economic development, this is a volatile tax which is strongly linked to the economic cycle.

There would therefore be significant budgetary risks to Wales”.

Add to that that Stormont is “dysfunctional” and “not fit for purpose” according to Peter Robinson and I think anyone would have second thoughts about letting the local politicians have these powers.

When it comes to Sinn Fein their desire to cut fiscal ties to London trumps any professed concern for public sector workers - who would be hit by cuts to the block grant.

The desire of Unionists to see the powers come to Stormont merely highlights how fixated they are with devolution.

For our part, TUV believes that we should maintain the UK’s unified taxation system.

That should be the natural position for any Unionist. It also makes sound fiscal sense for Northern Ireland.

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