Tories consider letting Northern Ireland slash corporation tax
BRITAIN'S Conservative Party, which is the favourite to win this year's general election, will "look closely" at proposals to allow the Northern Ireland Executive set its own level of corporation tax, it said yesterday.
"The Conservative Party has been saying for some time that a radical, long-term strategy is required to end Northern Ireland's dependence on the public sector and to boost private-sector investment," said Owen Paterson, the Conservatives' shadow secretary of state for the North.
Describing the report by the Northern Ireland Economic Reform Group as "authoritative," Mr Paterson said it made "a very coherent case for a reduced rate of corporation tax in Northern Ireland".
Support from the Conservatives might turn the idea of a lower tax on profits into a realistic proposition.
The report said cutting corporation tax to the Republic's rate 12.5pc could generate an extra 90,000 jobs over 20 years. Firms in the North pay 28pc, before allowable deductions.
It also argued that a low rate of corporation tax was the only change which would turn the North's economy around quickly.
EU law forbids different tax regimes in different regions of a single state, such as the UK. However, devolved regions can have fiscal independence and the new thinking is that Northern Ireland itself could take the initial loss of revenue if the Executive decided to cut the tax.
Instead of corporation-tax revenues being transferred to London, they would remain with the Executive and the annual grant from Westminster would be cut by the same amount. It would then be up to the Executive to decide what to do about the tax rate.
Supporters of the scheme admit it would have to be offered to Scotland as well, and possibly Wales.
It is not clear how much of the plan will eventually make its way into the Conservatives' election manifesto. The party has joined forces with the Ulster Unionist Party to campaign in Northern Ireland on a single platform.
Sources say Mr Paterson, who has spent a lot of time with business people in the North, is a strong personal supporter of the idea.
"Northern Ireland faces some economic challenges that are unique within the United Kingdom," he said yesterday.