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Northern Ireland May Get Corporate Tax Powers

by Jason Gorringe,, London

04 December 2014

The UK Government has said that it is "well disposed" to the possible devolution of corporation tax rate-setting powers to Northern Ireland, provided that progress can be made in current cross-party talks.

Chancellor George Osborne announced during his Autumn Statement that the UK Government "recognize[s] the strongly held arguments for devolving corporation tax setting powers to Northern Ireland." He explained that the Treasury believes that this is possible, provided that the Northern Ireland Executive can show that it is able to manage the financial implications. Providing that Northern Ireland provides reassurances, the UK Government would introduce legislation before the end of the current Parliament, which is to be dissolved in May 2015.

According to the UK Government, the power to set corporation tax rates could be a powerful tool to help the Executive rebalance the Northern Ireland economy, generate sustainable levels of growth, and drive private sector employment. Northern Ireland shares a border with the Republic of Ireland, which levies a 12.5 percent corporation tax rate.

Theresa Villiers, Secretary of State for Northern Ireland, said: "It has taken a significant effort to get to this point and it is positive news that Northern Ireland could be on the brink of getting these powers. [The] Autumn Statement has raised the stakes in the cross-party talks and made it even more vital that the parties do all they can to reach an agreement in the short time we now have. It is vital not to let this opportunity slip away."

Paul Terrington, PwC Regional Chairman in Northern Ireland, commented: "The fact that Westminster is willing to take this step should stimulate an informed debate on what Northern Ireland needs to do to ensure that, if corporation tax is devolved, we get the greatest benefit from for the region at the lowest cost to taxpayers and business."

Osborne also announced that an agreement has been reached with the Welsh Government on the full devolution of business rates (property tax). In addition, the Government will publish the draft clauses of legislation for the devolution of powers over income tax rates and thresholds to the Scottish Parliament in the new year.

In a December 3 statement, Kevin Kingston, President of Northern Ireland Chamber of Commerce and Industry (NI Chamber), said: "NI Chamber welcomes today's announcement on the devolution of Corporation Tax powers to the Northern Ireland Executive. The Prime Minister has listened to calls from the business community and all of Northern Ireland's political parties for the devolution of powers, with the outcome now placed firmly on the Northern Ireland Executive's willingness to cooperate on a number of issues which have challenged them."

"With the powers now sitting firmly in our hands, our politicians must grasp this opportunity whilst using the two years prior to the implementation of the new tax rate to ensure that we maximize the opportunity."

"The crucial point when it comes to the Corporation Tax decision is that Corporation Tax is an investment in the private sector to grow new opportunities and to put new jobs on the ground for all of our communities. The price of doing nothing, of focusing solely on the past and ignoring the opportunity of the future is – for the business community – unthinkable."

The devolution of powers comes on the condition of a pro-rata reduction in the block grant, money which the UK Government provides to each of its regions to fund their day-to-day operations.

TAGS: tax | business | Ireland | property tax | corporation tax | United Kingdom | legislation | tax rates

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