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Northern Ireland corporation tax could work, say MPs

THERE IS A "convincing case" for reducing the corporation tax rate in Northern Ireland, MPs have said.

The government issued its consultation on a possible reduced rate of corporation tax in the province on 24 March, the day after chancellor George Osborne announced the review in his Budget.

The Commons' Northern Ireland affairs committee released its report on the possibility today, which supported the devolution of the tax rate to the Northern Ireland assembly. This would "assist the indigenous private sector to expand, innovate and employ more staff", as well as allow Northern Ireland to compete with the Republic of Ireland, which has a 12.5% corporation tax rate.

The report also said that a lower corporation tax rate "was not a panacea" for all Northern Ireland's economic ills, stating that there are implementation problems. One of these is the European Union's stipulation that any decrease in corporation tax for a certain region must be paid for in a decrease in state aid.

The MPs criticised HM Treasury for a lack of knowledge about how tax is raised in Northern Ireland.

Laurence Robertson, chairman of the committee, said: "The evidence we received from businesses, trade unions, economists and politicians formed a convincing argument for a lower rate for Northern Ireland, which could help to unlock the potential of its private sector by boosting growth, innovation and exports."

The Chartered Institute of Taxation warned that it "would not be a one-way bet". Brendan Morris, chair of the CIoT's Northern Ireland branch, said: "If a corporation tax rate cut worked, that would mean more companies choosing to locate themselves in Northern Ireland, generating more income tax, national insurance, business rates and VAT.

"This could be a real boost to the Northern Irish economy but it would not be a one-way bet. There is no guarantee that the books would balance in the Executive's favour."

Company Formation in Northern Ireland

Added: 07/06/2011

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