Corporation tax: Northern Ireland reform
The measure
The Chancellor has announced that the Government will produce a paper, in consultation with the Northern Ireland Executive, on rebalancing the Northern Ireland economy. This will include examining potential mechanisms for changing the corporation tax rate in Northern Ireland.
Who will be affected?
All Northern Ireland businesses.
When?
The consultation paper is expected to be published in Autumn 2010.
The Chancellor has acknowledged that spending cuts could hit Northern Ireland disproportionately because of the relative size of the public sector in the local economy.
Businesses in Northern Ireland and economists have put forward the argument that private sector growth could be stimulated by a cut in the local rate of corporation tax to match the corporation tax rate of 12.5% across the border in the Republic of Ireland.
The previous Government considered the measure in the Varney report published in 2007. The report concluded that a reduced rate of corporation tax for Northern Ireland would cost almost £300 million a year in lost tax receipts and could also displace existing businesses from the rest of the UK.
It will, therefore, be interesting to see if the new Government considers £300 million per year a price worth paying until a better public/private balance is reached in the Northern Ireland economy.
