Corporation Tax Debate Continues

The debate over a possible devolution of corporation tax to the Stormont Executive has again been highlighted.

As a second NI peer has expressed unease about a proposed devolution plan for the setting of a rate for corporation tax, the whole issue of opportunities for economic growth were in focus as the NI Enterprise Minister Arlene Foster launched the latest 'Economic Commentary' by the Department of Enterprise, Trade and Investment (DETI).

An accompanying DETI statement said that, in light of the current consultation by HM Treasury on rebalancing the Northern Ireland economy, and the complexities and costs around lowering corporate taxes in NI, this edition of the Commentary focuses on corporation tax by examining the opportunities for economic growth through increasing Foreign Direct Investment (FDI).

Arlene Foster said: "Although the Treasury's consultation paper on reducing corporation tax in Northern Ireland provides robust information on the potential costs, there is less information included on the potential benefits.

"It is in this context that my independent Economic Advisory Group made an important, and welcome, contribution to quantifying the economic benefits in terms of additional Jobs and growth."

Dissent

Not everyone is behind such a move however, with the North Down MP Lady Hermon saying she does not believe lowering corporation tax will necessarily bring more investment to Northern Ireland.

"I've had the benefit of the evidence from the select committee about the two sides of the argument," the former Ulster Unionist politician said.

"I have to say at this stage I was not persuaded it was a good idea in the current economic climate."

Another independent peer, John Taylor [Lord Kilclooney] who also used to be an Ulster Unionist, said last week that cutting corporation tax could mean a fall in the block grant to NI from the Treasury of up to £300m a year in order to drop the current rate of 28% to one closer to the 12.5% in the Republic.

He insisted that claims that a low rate of tax would create 90,000 new jobs, over 20 years was not realistic and slammed the NI Secretary of State, Owen Paterson and what he described as a Sinn Fein/DUP partnership for blindly supporting the plan which would see NI's block grant severely reduced.

Meanwhile, Minister Foster also noted that her Economic Advisory Group (EAG) and said it had published a report on the 'Impact of a Reduced Corporation Tax'.

She said this research examined the likely magnitude of the economic benefits in terms of FDI, jobs and economic growth.

She noted that the report's findings were broadly consistent with initial results from research commissioned by DETI, to assess the potential increase in jobs from FDI.

As for the latest report, the Economic Commentary summarises the EAG report which found that even with modest assumptions around future FDI and local reinvestment, the overall impact of reducing corporation tax on the Northern Ireland economy is likely to be positive.

It also suggests that reducing corporation tax is expected to induce economic convergence with the UK and other competitive countries by creating a more private sector oriented economy.

Commenting on the latest position with the economic strategy, DUP Minister Arlene Foster continued: "There is a convincing case for reducing the corporation tax rate in Northern Ireland. Whilst everyone accepts that this is not the answer to all our economic challenges, I believe a reduction in corporation tax would bring major benefits to the local economy.

"It is likely to have a positive effect on foreign direct investment, creating job opportunities, as well as strengthening the indigenous private sector, encouraging innovation and helping local companies to expand by growing their business base and develop supply chain linkages," she continued.

The Minister concluded: "I would strongly encourage anyone with an interest to take a look at the research, a good summary of which is provided in the latest Economic Commentary, and then respond to the HM Treasury consultation before it closes on 24 June."

In May, Arlene Foster told MLAs a decision to devolve power to vary the rate of corporation tax could be made towards the end of the year.

She said she endorsed reducing the rate which would be a "radical change needed for the Northern Ireland economy" as the current corporation tax rate in the UK is 26%, compared to 12.5% in the Republic of Ireland.

See: Corporation Tax 'Con' Highlighted

(BMcC)