NORTHERN IRELAND should be given the right to set its own rates of corporation tax, though the change would cause major issues for the British treasury because it cannot currently say how much businesses pay in taxes in the North, an influential House of Commons committee has said in a long-awaited report.
“On balance, we believe there is a convincing case for reducing the corporation tax rate in Northern Ireland, not least so it can better compete with the Republic of Ireland,” said the Northern Ireland Affairs Committee, chaired by Conservative MP Laurence Robertson.
Under EU rules, Westminster would have to cede control of corporation tax to the NI Assembly and Executive. The block grant from the treasury, which funds the North’s public services, would have to be cut by the amount lost in corporation taxes.
The change would pose “several administrative hurdles” for the treasury, revenue and customs, since the treasury would need new systems to isolate the amount of corporation tax paid by Northern Ireland businesses, and that paid by those based elsewhere with Northern Irish divisions.
Democratic Unionist MP David Simpson said the Assembly and Executive must know Northern Ireland’s corporation tax payments before decisions are made: “In this age of technology, the Treasury cannot give us a figure for what taxation they take out of NI. That is madness,” he said.
The Treasury should “urgently” come up with ways to isolate Northern corporation tax receipts, said the report. If Stormont decided to cut corporation tax, the block grant would then be reduced by that sum. If a lower rate spurred business, Northern Ireland would then enjoy the extra fruits from corporation tax. “This would be the method we would prefer,” said the MPs. “We agree that the burden on UK businesses overall must not outweigh the gain to Northern Ireland businesses.”
Mr Robertson said: “I think the gamble is to do nothing. We are not just talking about competing with the Republic. We are talking about bringing in investment from around the world. We have economies growing all over the world. The risk is to do nothing.”
Democratic Unionist MP Ian Paisley jnr said: “It is not easy, it will not be done overnight. But if we get those elements together . . . Northern Ireland will be a prosperous place in the years to come.”
The Scottish National Party said the committee’s report enhanced the case being made by Scottish First Minister Alex Salmond for a similar concession to Edinburgh.
