NORTHERN IRELAND’S business community is being “hypnotised” into believing that cuts in corporation tax rates will succeed, without considering the impact of tax revenue losses, a leading academic has told a House of Commons inquiry.
If implemented, lower corporation rates would significantly cut the amount of money received by Northern Ireland from the UK exchequer, John Simpson of the University of Ulster told the Commons’ Northern Ireland Affairs Committee.
Mr Simpson believes that such changes would unfairly benefit the businesses already in existence paying higher business taxes, adding that changes, if they are to be made, should be targeted rather than offered to everyone.
The over-dependence of Northern Ireland’s economy on public services is exaggerated, he believes: “The private sector provides 70 per cent of the jobs; the public sector 30 per cent. It isn’t as miserable as is sometimes described.”
He quoted Prof John FitzGerald of the Economic and Social Research Institute, who has argued that the North is not ready for corporation tax cuts “because it needs to do so many other things first”.
Secretary of State Owen Paterson strongly favours reducing Northern Ireland’s corporation tax rate to 12.5 per cent to bring it into line with the Republic, though the UK treasury has yet to make its final attitude known.
The benefits for businesses from such a cut, said Mr Simpson, could be replaced by just 4 per cent greater efficiency in labour costs.
