22 June 2011

Phased corporation tax cut ‘best option’ for Northern Ireland


The Secretary of State has said a phased reduction in Northern Ireland’s corporation tax would be “sensible”. 

Owen Paterson said reducing the rate gradually over time would benefit the local economy, even if it meant millions of pounds were lost from Northern Ireland’s block grant from Westminster. 

“I think the sensible way to do this is to do what Canada did recently and phase things in,” said Mr Paterson. 

“So if you went over five years, the cost for each drop of 2.5% in the corporation tax is actually £60-90m. 

“Now £60m is 0.5% of the £12bn block grant so that is a very, very modest investment in what could be something which would create enormously more wealth and employment than that very marginal reduction in the block grant.” 

Mr Paterson said it was “crucially important” for local businesses to participate in the current consultation over corporation tax. 

He was speaking after the Treasury consultation paper, Rebalancing the Northern Ireland Economy, was launched last Thursday. 

The consultation period will continue until June 24, seeking views on the possible future devolvement of corporation tax setting powers from Westminster. 

Among the options being considered by the Treasury is allowing the Executive to reduce Northern Ireland’s corporation tax level from 28% to 12.5%, which is the rate in the Republic. 

Business chiefs say such a reduction would facilitate inward investment and provide a jobs boost to Northern Ireland. 

However, reducing our corporation tax rate could mean a £270m reduction in the block grant. 

That could be offset by a 6% rise in investment by domestic and foreign companies, it is claimed. 

Alternatives to a straight reduction include deferring the move for several years and phasing the change in to allow companies to plan their strategies. 

Mr Paterson said there was strong support among business owners for lower corporation tax and called on them to make their opinions known by engaging in the consultation process. 

Speaking on the BBC’s Politics Show yesterday, Mr Paterson said: “I have been going round businesses in Northern Ireland for over three years and I am being told time after time that they want to see corporation tax reduced to make them more competitive and allow them to put money back into their companies to invest for the future and create jobs. 

“Those businesses must now take the opportunity to tell the Chancellor what they have been telling me.” 

The consultation paper, ‘Rebalancing the Northern Ireland Economy’, is available on the HM Treasury website. 

The consultation ends on 24 June 2011. Responses can be emailed to

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