Pressure 'increasing over corporation tax' in North

The British government is coming under increasing pressure from the business community outside Northern Ireland for a more competitive corporation tax level, a Stormont Assembly Committee chairman claimed today.

As David Varney prepared to meet finance minister Peter Robinson in Belfast today to discuss his review of taxation policy affecting the North, Sinn Féin’s Mitchel McLaughlin criticised the Treasury’s one-size-fits-all approach to the economy.

The Assembly Finance and Personnel Committee chairman said: “The 26 Counties is the most successful economy in the immediate European context as far as the North is concerned.

“The northern economy is also struggling to keep parity with other regions in Britain.

“However, the British government has adopted a centralist one-size-fits-all approach that does not work for the North.

“We are obviously hoping to convince David Varney in terms of the needs for a more favourable rate of corporation tax for the North.

“This is an issue that all the parties agree on and it is an argument which is also being made over the Irish Sea in Britain.

“The alliance for tax reform in Britain has completed a substantial report for Gordon Brown which argues that a cut in Corporation Tax to the same rate as the Republic of Ireland at 12.5% would result in 60% more investment and a 9% increase in GDP based on employment and disposable income.”

The Northern Executive parties have been urging the outgoing chancellor of the exchequer to approve a cut in corporation tax to 12.5% in the North as part of an economic package to bolster devolution.

However, treasury officials have been loath to make the case in Europe for the North to have a different corporation tax rate.

It is believed the devolved administrations in Scotland and Wales would also pressurise the British government to give them a 12.5% rate rather than give the North a competitive advantage.

Stormont ministers argue, however, that a special case should be made for the North because it is the only region in the UK which shares a land border with another country, Ireland, which enjoys a competitive advantage in drawing potential foreign investors because of its favourable corporation tax rate.

It is also believed that the treasury is reluctant to grant the North a special rate because of concerns that some businesses would uproot from other parts of the UK to the province if it had a more attractive corporation tax level.

David Varney, a former head of the British inland revenue, was appointed in March by Gordon Brown to examine fiscal policy in the North.

Some parties at Stormont, however, are sceptical about whether he will be sympathetic to their demands for financial incentives and believes he has been hand-picked by Mr Brown because he is in tune with the Chancellor’s thinking.

David is also due to meet members of the Assembly’s Finance Committee and Enterprise Committee tomorrow.