UK to unveil plans for rival corporation rate in North
Budget measure will cost Republic business
THE Republic's low corporation tax will be challenged head-on by Northern Ireland under new plans due to be unveiled today.
UK officials will say in Belfast that the Northern Ireland Assembly should be allowed to introduce a special low corporation tax to win business from the Republic.
"In Northern Ireland tomorrow, the treasury will publish a paper on how we help their private sector to grow," UK Chancellor George Osborne told the House of Commons in his 2011 budget speech yesterday.
"To deal with the unique issues posed by the Irish Republic's business tax regime, it considers the case for Northern Ireland having an even lower rate of corporation tax than the rest of the UK," he added.
The news is a further blow to Enda Kenny's government as he holds talks with other European leaders in Brussels today about reforms to the EU's taxation system.
The Republic competes with the North to become home to multi-nationals from overseas which are attracted by low taxes and an English-speaking workforce.
Officials in Dublin can currently offer a corporation tax rate of just 12.5pc compared to 28pc in the UK. Mr Osborne said yesterday that this rate will come down to 23pc across the UK, bringing it closer to the Irish rate.
A Department of Finance spokesman said the Government here did not have advance notice of Britain's decision and declined to comment.
"The UK did not provide information on its taxation proposals," he added.
Today's eagerly awaited announcement by Secretary of State Owen Paterson in Belfast will end weeks of speculation and lobbying in the North for a special rate of corporation tax to wean the region's economy from its dependence on the public sector and financial transfers from the government in London.
Michael Hall, a tax partner at Ernst & Young, said the discussion paper will be "of much more significance" for the North than the UK budget unveiled yesterday.
Campaigners have argued that bringing the tax in line with the Republic could help invigorate the Northern Ireland economy.
However, there are concerns among some Northern Irish politicians that any reduction would be paid for in a cut in the block grant from Westminster.
Northern Ireland Finance Minister Sammy Wilson confirmed he had seen a draft version of the document and noted that it will be followed by a four-month consultation. It would also allow Northern Ireland to set lower taxes on flights between the North and the US.
Business groups have been saying for some time that an announcement on corporation tax is on the horizon. Ian Coulter, vice-chairman of the CBI in Northern Ireland, said the corporation tax issue was about job creation.
"Not only would it assist greatly in attracting foreign direct investment, it would bring beneficial support to indigenous firms in growing and creating further jobs as they seek new export markets."
Just under 70pc of Northern businesses surveyed by business advisory firm Goldblatt McGuigan recently said they want the Executive to create a special corporation tax status for Northern Ireland. Just under half of the businesses surveyed put a cut in corporation tax as one of the top three things they want Britain's chancellor to do.
"Speculation has been rife in recent weeks that an announcement about a special status is in the offing," Goldblatt McGuigan managing partner Sam Goldblatt said last week. "If Wednesday brings developments on this front it will be a momentous Budget indeed."