N Ireland looks to its own corporation tax in wake of Budget

Northern Ireland is setting up a fiscal commission that could lead to businesses there escaping a rise in the rate of corporation tax which would be twice that in the Republic of Ireland.

The province won devolved powers to set its own corporation tax rate through the Fresh Start Agreement in 2015. This prompted promises from the main political parties to lower its rate to 12.5 per cent, in line with the Republic. However, those efforts tapered off when the UK reduced its own corporate tax rate to 19 per cent.

Asked whether his department was considering setting a regional rate so the province’s businesses would not pay the 25 per cent level imposed on the UK’s most profitable companies from 2023, Conor Murphy, Northern Ireland’s finance minister, said: “I shortly intend to establish a fiscal commission to examine the executive’s tax varying powers. Its report will provide a comprehensive picture of the costs and benefits of further fiscal devolution measures.”

Northern Ireland business groups, who campaigned heavily for the province to chart a path closer to the Republic’s corporate tax rate, expressed dismay at the increase announced by chancellor Rishi Sunak in Wednesday’s Budget.

“It’s a potential huge risk,” said Matt McCullough, director of Belfast-based HannawayCA Corporate Finance, who said he had already had calls from clients on the potential fallout and whether it would be better to relocate in the Republic because of the lower corporation tax rate.

“It’s important the business community pull together and work with the politicians to mitigate these risks,” he added. “We’ve had a couple of decades of progress in Northern Ireland that could just walk across the border.”

Darragh McCarthy, a director of Belfast Chamber and chief executive of FintTru, a fintech which employs close to 750 people in Northern Ireland, said the tax rise, coming amid Brexit’s fallout, would “raise questions for future investment and location” for companies in the province.

In the hours after Wednesday’s Budget, the Northern Ireland branch of the employers’ group the CBI said concerns about higher tax rates were “particularly acute” for its members. It is now canvassing members on how they will be affected before engaging with policymakers.

“The Fresh Start Agreement has committed the NI Executive to reducing the corporation tax rate to 12.5 per cent so this is an issue that will need much more attention as we think about long term economic growth at the regional level,” said Angela McGowan, the CBI’s Northern Ireland director said.

A senior Northern Ireland trade body official said while his members would like a lower corporate tax rate, such an outcome was unlikely since the reduction in revenue would ultimately have to be covered by lower public spending and the pandemic has made people loathe to cut resources to health or education.

“I don’t get any sense that this executive is going to prioritise the economy [over health and education],” he said.