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Ireland Formally Suggests 12.5% Tax Rate For The North

by Jason Gorringe, Tax-News.com, London

04 July 2007


Ireland's Institute of Chartered Accountants (ICAI) has formally written to Sir David Varney as he carries out his review of Northern Ireland Tax Policy for the Chancellor of the Exchequer. The detailed submission supports the introduction of a reduced corporation tax rate in Northern Ireland to a level of 12.5%, being the same as the rate applicable in Ireland.

The ICAI submission follows a meeting between it and the Varney Team last month.

ICAI notes the current high level of international goodwill towards Northern Ireland, and suggests that this goodwill can be transformed into Foreign Direct Investment if the economy is characterised by self sufficiency rather than subsidy. A low corporation tax rate is key to attracting Foreign Direct Investment.

In its submission, ICAI rejects criticisms that a low corporation tax rate encourages tax avoidance and results in artificial tax planning. The submission contains an analysis of how these pitfalls have been successfully avoided in the South, where low corporation tax rates have prevailed for several years. The submission also offers a roadmap of how a lower rate could be introduced without contravening the EU Treaty. ICAI points out that Portugal was supported by the UK Government when it attempted to introduce a special low tax regime for the Azores.

The submission concludes by noting that international experience would suggest that a low corporation tax rate usually boosts Exchequer receipts overall, because of greater contributions from VAT and payroll taxes arising from increased economic activity.

ICAI says it is in an excellent position to comment on the technical aspects of tax policy because it is an all-island organisation with first hand experience of the tax regimes North and South of the Border.

The full text of the ICAI letter to Sir David Varney can be found in the Tax News Resources section.

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