North 'will be able to match corporation tax in South'
Published 18/08/2014 | 02:30
NORTHERN Ireland looks set to be handed the power to slash corporation tax which will help it better compete with the Republic for inward investment.
The corporation tax rate in the North is 20pc, compared with 12.5pc in the Republic.
Businesses and political parties north of the border have been campaigning to have the rate brought into line with the Republic.
Senior sources in London and Belfast predict that an announcement will be made no later than October by British Prime Minister David Cameron.
Business lobby IBEC has said measures to boost the Northern Ireland economy would have a positive spill-over for the Republic.
IBEC chief Danny McCoy has previously said that there are more positives for the island as a whole from an all-island business model than the short-term competitive issues that may emerge from the North competing with the Republic.
"Having a vibrant all-island business model, I think it is in everybody's interests north and south," he said.
"Those who react to it in a static way, to say it's bad for the south, are not watching the dynamic that this can bring to a society as is evident by the success of the Irish model over the last few decades," he said.
The recession experienced in Northern Ireland had been deeper and longer than other regions of the UK - but a recovery in is underway.
Northern Ireland Finance Minister Simon Hamilton said he was optimistic that they would get a positive answer from Mr Cameron.
"I think that the [British] government wants to do this and we have made a very robust case to them," he said.
One Conservative Party source added: "I believe the Prime Minister is increasingly minded to make a decision to devolve this tax."
Lowering the rate of corporation tax is seen by the local business community and all the main parties in Northern Ireland as a key to revitalising the local economy. It could reduce reliance on public spending, and raise wages in the private sector by attracting in hi-tech companies in a similar way multinationals like Google, Facebook and other US companies have established bases here.
However, the cost of cutting the tax is likely to be more than £200m (€250m) a year.
Northern Ireland must meet the money from its own resources because EU rules say a central government like Westminster cannot subsidise tax reductions made by a regional Assembly like Stormont.
If Mr Cameron makes the announcement, legislation would have to be completed before parliament dissolves on March 30. After that it would take another two years before the tax would actually be reduced.