Thursday 27 October 2016

Scotland and Wales push to be allowed compete on tax

Kevin Doyle and Niall O'Connor

Published 19/11/2015 | 02:30

Minister for Finance Michael Noonan
Minister for Finance Michael Noonan

A deal to allow Northern Ireland reduce its corporation tax rate to match the Republic's is set to spark fresh demands from Scotland and Wales for more control over their taxes.

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The main political parties in the two countries have told the Irish Independent they are carefully studying the arrangement handed to the North and will seek concessions of their own.

The Government here has played down the significance of being in direct competition with Northern Ireland for foreign investors, but the potential for Scotland and Wales to challenge our 12.5pc corporation tax rate is a larger concern.

The current rate in the UK is 20pc but there are plans to reduce this to 18pc by 2020.

However, as part of the new Stormont Agreement aimed at getting powersharing back on track, Belfast will be given power to go even lower.

Jonathan Edwards, an MP with Wales's Plaid Cymru party, said that if Northern Ireland politicians are allowed to make major tax decisions then the same power "should absolutely be devolved to Wales".

He continued: "We look with envy at the Republic of Ireland and what has been achieved in economic terms since independence and your ability to recover from the crash. There is no reason we should not get the same."

Mr Edwards said Wales was currently getting an "inferior" deal from Westminster.

Similarly, in a strongly worded statement, a spokesperson for the Scottish National Party told the Irish Independent that it was "committed to ensuring that Scotland is a competitive destination for business".

"The devolution of corporation tax to the Northern Irish Assembly proves that there is absolutely no good reason why Holyrood (the Scottish assembly) should not also benefit from these powers and shows the complete disregard this UK government has for Scotland.

"Without the full control of Scotland's economy - and the Tories continued refusal to devolve some of the most potent economic levers - Scotland will remain at a competitive disadvantage inside the UK and in the global market."

The Confederation of British Industry (CBI) said the new latitude being given to the Northern Assembly would make life "a bit more competitive for the IDA".

The CBI's Nigel Smith said companies were unlikely to "up sticks" from the Republic or other parts of the UK, but the North would be in a better position to attract new investment.

A spokesman for Finance Minister Michael Noonan said he backed the extra powers for Northern Ireland as it "has the potential to generate benefits on both parts of the island".

He said: "The 12.5pc rate is a central pillar of our taxation system but it is important to remember that attracting foreign direct investment and stimulating growth is about much more than just having a competitive tax rate.

"A reform of the Northern Ireland corporation tax rate has the potential to generate benefits on both parts of the island."

Tánaiste Joan Burton said she was confident that the Republic can outperform the North in terms of attracting investment, despite the change in corporation tax.

"Time and time again, we are told, yes, corporation tax is a significant draw but the real draw here is the people."

Irish Independent

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