Who supports corporation tax devolution for Northern Ireland?

William Computer

I have been a long time supporter of corporation tax reduction for NI. I really hope David Cameron takes the decision to reduce it. I understand there’s no guarantee.

People often remark that it if it happened it would give Northern Ireland an unfair advantage over England, Scotland and Wales when it comes to attracting investment. Maybe so but according to many of our top Economists and business people it is the only way for us to compete with the south of Ireland for investment and become more financially self reliant.

Many of us in Northern Ireland feel that because of how poor we are, we are a special case, I understand that irritates people but this is what David Gauke (the Exchequer Secretary) said to the NI Select Committee in relation to that.

David Gauke [Exchequer Secretary]: "I think the first point to acknowledge is that there is a particular case with Northern Ireland; the need to do more to stimulate the private sector there to increase investment is even stronger than it is across the UK as a whole. The cost of reducing corporation tax to 12.5% across the UK would be very considerable. Indeed, we get something in the region of £40 billion a year in the UK through corporation tax. Clearly, we are in circumstances where the deficit is very large and we have limited room for manoeuvre, so whatever the long-term arguments we probably cannot afford to do that. However, given the unique circumstances of Northern Ireland, there is an argument—and this is something that the Northern Ireland Executive and Northern Ireland Assembly would need to determine—for pursuing this policy there."

And this is what he said to them in relation to reducing it in other poor parts of the UK.

David Gauke: "I think there would be significant difficulties if we tried to use corporation tax in a very targeted way in specific areas, simply because one would see considerable economic distortions, and monitoring and administering corporation tax in that way would be quite difficult. As I say, Northern Ireland has a land border with the Republic of Ireland but does not have a land border with any other part of the UK, so is better placed to do that."

"That is not to say that we should not be looking to find ways of helping those parts of the UK heavily dependent upon the public sector. Of course, as you will be aware, one of our policies is the national insurance contributions holiday in those regions and nations of the UK outside the greater south-east for start-up businesses. I know the intention is not to talk about that today, but we have not had the numbers taking up that NICs holiday that we would like. However, there are steps that the Government is taking to try to encourage the private sector in those areas where it is not as strong as it might be. As far as corporation tax is concerned, though, I think there is a special case for Northern Ireland. Let's not forget it is a fairly bold policy to be reducing corporation tax from 28% to 23%, which I hope the whole of the UK will benefit from."

I can't post a URL at the moment, the bits in quotes are from the Northern Ireland Select Committee hearing on rebalancing the Northern Ireland Economy.

I’m of the opinion that even if they don’t allow us to go so far as to reduce our corporation tax, something radical will be done to enable us to attract more investment.

William Computer

From the BBC archive.

"Northern Ireland corporation tax cut 'next year'" [2011]

"Treasury sources have told the BBC that a lowering of corporation tax in NI could happen next year."

"Corporation tax is at 28% in the UK but only 12.5% in the Republic of Ireland."

"BBC presenter Andrew Neill told the Politics Show the treasury had long been against different rates of corporation tax within the UK."

"But the politics show has learned from senior treasury sources that the London government is indeed minded to grant Northern Ireland its wish," he said."

"Although it might not be allowed to go as low as 12.5%, since Ireland is under EU pressure to raise it, any decent cut would make Northern Ireland more attractive to private enterprise."

"Campaigners for the move argue that bringing the tax in line with the Republic could help invigorate the economy in Northern Ireland."

"SDLP leader Margaret Ritchie said her party had long supported the idea of "equalising" corporation tax between Northern Ireland and the Republic."

"When an investor comes here from the US or the far east, they will go to the region that has the lower level of corporation tax," she said."

"Hence the south of Ireland has seen many good examples of foreign direct investment and we in the north have lost out."

DUP MLA Peter Weir said cutting corporation tax would be something that should be "phased in".

"There are certain implications with regard to corporation tax. I would like to see this as something which takes place over the life of the next assembly," he said."

William Computer

BBC Archive

"Committee supports lowering of NI corporation tax."

"An influential Westminster committee has said there is a convincing case for lowering corporation tax in NI."

"The Northern Ireland Affairs committee said a reduction could boost the private sector and help innovation and exports."

"It said it is up to the Stormont executive to decide what rate it should be lowered to."

"The current rate is 28% compared to 12.5% in the Republic".

"The committee was however critical of the Treasury and said it was "surprised to discover that HM Treasury do not know how much corporation tax is raised in Northern Ireland".

The Chair of the NI Affairs Committee, Lawrence Robertson MP, has called on the government to examine the report.

He said the evidence his committee had received from trade unions, economists and politicians "formed a convincing argument for a lower rate in Northern Ireland".

A government consultation paper examining the case for lowering corporation tax rates in Northern Ireland was published in March.

The overall UK rate is 28% and will fall by 5% over the next four years.

The NI Affairs committee report acknowledges that there is still not complete clarity on the legality of the proposal to cut the tax in NI.

The committee said it is "confident" the plans meet the criteria of the relevant piece of EU law, known as the Azores judgement.

"However, it adds that "it is difficult to know how the European Court of Justice would apply the judgement in a new situation"."

"One of the witnesses to the inquiry, Rosa Greaves, professor of European Commercial Law at the University of Glasgow, said that two recent cases relating to the Azores ruling have only been ruled on by national courts, not the European Court."

"She said: "The gate was opened but we don't know how wide," and "it needs a European Court of Justice decision to be final"."

"The government told the committee there has so far been only one informal meeting with the EU to discuss this matter."

"The committee also acknowledged that a cut in the tax would create a form of "rough justice" where banks and utilities companies would experience a windfall gain without creating any new jobs."

"EU law means that any cut could not be applied preferentially to particular sectors, and could not be refused to particular sectors."

"The committee concludes that "such rough justice does not invalidate the wider benefit of adopting a lower rate".

William Computer

Much more recent BBC June 2nd 2014

Northern Ireland corporation tax: Supporters optimistic

Sources told the BBC that HM Revenue and Customs have almost completed detailed technical work on corporation tax for Northern Ireland.

Supporters of the devolution of corporation tax to Northern Ireland have expressed growing optimism that the power will be in place by 2017.

Stormont wants to be able to match the 12.5% tax rate in the Republic of Ireland.

The optimism comes despite an assertion by the Conservative Party in Scotland that corporation tax was "the least suitable of all taxes for devolution".

That conclusion is contained in the party's Scottish devolution commission.

The commission is chaired by Lord Strathclyde, former leader of the House of Lords.

It said that corporation tax was "not economical to collect on a small scale" and "does not generate a reliable yield".

It also asserts that "devolution would be complex in law".

Before parliament

However, the BBC understands that HM Revenue & Customs (HMRC) have almost completed detailed technical work on corporation tax devolution for Northern Ireland.

HMRC is preparing advice for government lawyers who will draft the legislation which can then be brought before parliament before the end of 2014.

The most likely time for an announcement from the Westminster government is around the time of the Chancellor's autumn statement.

That will leave a tight legislative timetable as the UK general election is in May 2015.

Stormont would then have to pass its own legislation to introduce the reduced rate.

Supporters of the proposal are confident that they have the support of the prime minister but have cautioned that there are still some political uncertainties.

Complicating factors

Last year the prime minister 'parked' the decision on corporation tax until after September's Scottish independence referendum.

The referendum outcome that would be most complicated is a 'narrow no' as that could open up a broader debate about devolution of taxation powers across the UK.

Other complicating factors include Stormont's failure to reach agreement on implementing welfare reform and an increasingly tough public spending environment.

European rules mean that Stormont would have to compensate the Treasury for any tax reduction by handing back a portion of its annual budget.

The budget reduction could be as much as £400m per year, which could be a controversial political decision if it comes at a time of spending cuts.

However, supporters believe the economic boost to Northern Ireland from inward investment would outweigh the cost to the public purse."

aquascrotum

I'll reply...

I broadly support the idea of an enterprise zone for NI to allow a more competitive corp tax rate - the private sector needs a boost given the rug has finally (and inevitably) been pulled from under the public sector for 2015. Whether it actually attracts FDI is another question, more likely imo to have existing UK companies setting up in NI companies house to avail of the better rate but you'd have to assume the UK govt would close that loophole before allowing anything to proceed.

Whether I'd trust the cowboys in Stormont to administer tax raising affairs in between their normal playground antics...dunno. Maybe having power of real significance might stimulate the Executive into working functionally but that isn't a perception widely held. In the absence of actual leadership on real issues I'd rather it was administered from Westminster if it was on the table, otherwise it'll just be another political football for games between DUP/SF.

William Computer

Thanks for replying.

What you said about laws to prevent brassplating is correct, that's what the government will do.

It's not a panacea, we must do more.

Penfailed

I'm very much against it...for the time being. If they cut CT, the (already cut to the bone) block grant will be cut even further, resulting in even more job losses across the board. There's talk of up to 50,000 jobs that will be created as a result of a cut to CT but these figures have been plucked from the sky.