CHANGES TO European Union rules governing the grants that can be paid to companies locating in Northern Ireland coming into force early next year will “severely damage” its ability to win foreign investment, Invest Northern Ireland yesterday told a House of Commons committee.
From January 1st, the agency will be able to cover just 10 per cent of the costs of new firms locating in Belfast and just 15 per cent of the costs of new investments elsewhere, Invest NI executive, Jeremy Fitch told MPs.
The House of Commons’ Northern Ireland Affairs Committee is preparing a report on calls to cut Northern Ireland’s corporation tax rate to 12.5 per cent – the rate that applies south of the border.
However, such a cut would not cure all ills, Belfast-based PricewaterhouseCoopers executive Martin Fleetwood said. “We remain unconvinced that (lower) corporation tax would be the panacea for the significant problems that Northern Ireland experiences.”
Invest NI believes it could add 3,000 jobs to the number being attracted to Northern Ireland, though this figure is based on getting a share of investment that is won by IDA Ireland.
The MPs’ committee heard frequent compliments to the Republic “for setting the pace” on corporation tax, though Brendan Morris of the Chartered Institute of Taxation said the policy’s success sometimes overshadows the IDA’s other achievements.
Northern Ireland Secretary of State Owen Paterson strongly favours the introduction of lower corporation tax, believing that it could help to “rebalance” the economy which has a 75 per cent dependence on the public sector.
Under European Union rules, the NI Assembly can be given freedom to set its own business rates, but any loss in tax revenues must be borne locally, and not made up by extra payments from the Treasury.
Democratic Unionist MP David Simpson expressed doubts that such a freedom would be actually used: “If tax powers were given at no cost they would be used. But I’m not sure that they would if there was a cost.”
Liverpool Labour MP Joe Benton voiced the doubts shared by some English MPs that depressed areas in their constituencies could lose out if Northern Ireland was to be given favourable tax rules, saying it could pose “huge political problems”.
“Scotland and Wales could say that they have troubled spots, too,” said Mr Benton.
