Northern Ireland is urged to cut tax on companies
Report advises that rate should even undercut Republic's 12.5pc
Published 25/05/2011 | 05:00
NORTHERN Ireland has moved a step closer to competing head on with the Republic on corporation tax after a high-level committee concluded yesterday that there was a good argument for undercutting the Republic's 12.5pc rate. Scotland said it may also follow suit.
The conclusion came in a report published by an all-party committee of 14 MPs in Belfast, who had been asked to examine whether the North should cut corporation tax to the same level or even below that of the Republic.
"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," committee chairman Laurence Robertson said.
"The 12.5pc rate of corporation tax in Ireland has attracted significant inward investment and a number of large companies, as well as the ability to compete better with emerging economies," he added.
The tax on companies in the North and the rest of the United Kingdom is currently 26pc. The secretary of state for Northern Ireland, Owen Paterson, has already come out in support of such a move.
Yesterday, Mr Paterson teamed up with the Federation of Small Businesses in Northern Ireland for an online video campaign to ease "unnecessary nervousness" about the impact of the move on business in the region.
A spokesman for the Department of Finance in Dublin said the Government would neither support nor hinder such a move.
"As the Government has stated on a number of occasions, taxation policy is a matter for each member state," the spokesman said.
There are still some hurdles before such a move could come into force. Power to vary the tax rate needs to be devolved to Northern Ireland's 108-seat assembly and both London and the European Commission would have to agree.
Any cut in corporation tax would also have to be accompanied by a reduction in the grant to the North from London.
The committee said it was "confident" the plans would meet the criteria of the relevant piece of EU law, known as the Azores judgment.
However, it warned that low corporation tax was not a panacea for all Northern Ireland's economic ills and would be difficult to implement.
Scottish First Minister Alex Salmond seized on the report yesterday to argue that the semi-autonomous parliament in Edinburgh should also push for lower taxes but keep the rate higher than Ireland.
"This is a further indication of the way the wind is blowing and a similar move for Scotland is inevitable," Mr Salmond said, adding: "Rather than being dragged there over time, it would be far better for the UK government to respond positively now."