Monday 5 December 2016

Fight for jobs as North to slash corporation tax to match South

Belfast wins power to match Republic’s 12.5pc rate on business profits from 2018

Published 18/11/2015 | 02:30

Northern Ireland Secretary of State Theresa Villiers
Northern Ireland Secretary of State Theresa Villiers

Northern Ireland is to slash its corporation tax rate to 12.5pc in a move that will put the North in direct competition with the Republic for inward investment and jobs.

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Political leaders in Belfast have been handed the power to cut the rate of tax businesses pay on their profits from 2018.

The deal surrounding corporation tax was secured as part of the Stormont House Agreement, which has brought an end to the long-running political impasse that pushed power-sharing to the brink.

The agreement has settled a long-running wrangle over implementing welfare reforms in the region and has established initiatives for finally ridding the region of paramilitaries.

A new panel is to be set up to examine the ongoing problem of paramilitarism on the back of the brutal IRA  murder of Kevin McGuigan.

To the anger of victims’ campaigners, the deal entitled ‘A Fresh Start: the Stormont House Agreement and Implementation Plan’ does not include new mechanisms to tackle the legacy of the conflict.

But the decision to allow the Northern Assembly to bring the corporation tax rate in line with the Republic will put the Coalition on alert.

The document, signed following months of intense negotiations, paves the way for a full devolution of corporate tax power by 2018. The rate is currently 20pc, which campaigners say puts the North at a distinct disadvantage to Ireland.

As recently as last week, Taoiseach Enda Kenny emphasised the importance of the 12.5pc rate to the Irish economy.

But yesterday’s decision will spark fears that multinational firms will instead choose the North as a location for investment and job creation.

Government sources last night played down the significance of the move and said Ireland would respond accordingly to increased competition.

"And we continue to win new investments and jobs," the source said.

The agreement has settled a long-running wrangle over welfare cuts in the North and set up ways to rid the border area of paramilitaries.

A new panel is to be set up to examine the ongoing problem of paramilitarism on the back of the brutal IRA murder of Kevin McGuigan.

To the anger of victims' campaigners, the deal entitled 'A Fresh Start: the Stormont House Agreement and Implementation Plan' does not include new mechanisms to tackle the legacy of the conflict.

But the decision to allow the Northern Assembly to bring the corporation tax rate in line with the Republic will put the Coalition on alert.

Under the agreement, the North's finances will be topped up by an additional £500m from London to tackle issues "unique to Northern Ireland" such as the removal of so-called "peace walls", 15-metre-high 'fences' that separate some communities.

Northern Ireland will retain the most generous social welfare system in the UK by diverting funds from elsewhere, the deal says.

Northern Secretary Theresa Villiers confirmed that the way would be cleared for the corporation tax rate to be cut to 12.5pc by 2018.

Invest Northern Ireland chief executive Alastair Hamilton said slashing the rate could make the North "the most attractive" location in Europe for investors "based on a combination of tax, talent and value".

Last night, Professor Neil Gibson, director of the Ulster University Economic Policy Centre, said the corporate tax agreement was "hugely significant" for both the North and the Republic of Ireland.

"It is a significant deal for a number of reasons," said Professor Gibson.

"It will lead to increased competition across the whole island and increased competition for Foreign Direct Investment which Northern Ireland already has a good record in attracting. The island could become very attractive to overseas investors who may wish to exploit the opportunity of euro and sterling bases in the one location. Arguably the greatest significance is the message Northern Ireland sends out to the world, that as well as peace, we have secured a major economic policy."

Prof Gibson said the deal gave huge responsibilities as well as huge powers to the North's executive.

He pointed out that the agreement also had implications for devolution in the UK following the recent Scottish Referendum and demands by UK regions for devolved tax and other powers.

The UK is set to drop its corporate tax rate from 20pc to 18pc, but Northern Ireland's will be significantly lower at 12.5pc.

"This is the very modern face of devolution," said Prof Gibson who added that the deal may increase pressure on British Prime Minister David Cameron to extend tax devolution to other regions.

CBI Northern Ireland, which is a business lobbying group, said the move could rejuvenate the economy north of the Border, as it will provide a key ingredient to energise the private sector and create tens of thousands of new jobs, thereby transforming its economy.

Irish Independent

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