Report highlights benefits of lower corporate tax to North
A LOWER rate of corporation tax could help Northern Ireland net an additional 4,500 jobs a year, according to research from a new economic think tank.
Securing a lower rate of tax at 12.5 per cent – the current rate is 26 per cent – could not only boost employment but also substantially increase living standards, according to the North’s Economic Advisory Group (EAG) .
The EAG, which was established to provide independent advice to the North’s Minister for Enterprise, said it is convinced that a lower rate of corporation tax would bring major benefits to the North’s economy.
The group acknowledges that Northern Ireland might have to pay a price if it secures the power to set its own rate of corporation tax, which would then be lower than the rest of the UK.
In order to comply with existing EU legislation the North would suffer an initial decrease in the block grant – worth nearly £10 billion per annum – it receives from the UK treasury.
However, the EAG argues that this could be managed in a number of ways, and the benefits Northern Ireland would derive from a lower corporation tax would far outweigh the cost because it could deliver an impetus that the combination of other policies would be unlikely to achieve.
It says there are six chief benefits from a lower rate, and the EAG highlights that the potential for substantial job creation is top of the list.
The group also believes the North would attract significant new foreign direct investment, and this would help deliver a higher standard of living.
Economic growth could be around one percentage point higher per year, while the economy could also grow significantly to be around 13.8 per cent bigger by 2030.
Northern Ireland would also enjoy a higher rate of productivity and its exporting sales would grow to a potential £15 billion by 2030.
The chairwoman of EAG, Kate Barker, said the impact of a lower rate of corporation tax would not only accrue to businesses but right across society.
However, she added: “The policy is not a silver bullet. As the report also indicates, it needs to be part and parcel of other steps to raise employment, wages and productivity in Northern Ireland.”
The EAG’s report comes as a new representative group of local business organisations and key business people launched their campaign in support of a lower rate of corporation tax.
GROW NI believes a lower rate would help “rebalance the economy, grow the private sector and create long-term, sustainable, well paid jobs”. It says the North’s business community “is absolutely united” about the benefits a lower rate could deliver.
The North’s Enterprise Minister Arlene Foster said she welcomes the current debate about the impact of a reduced corporation tax. “Lowering the corporation tax rate has the potential to create employment and strengthen the private sector. However, we need to fully understand just how significant this measure could be for the Northern Ireland economy.”