PRC-UTE
25th November 2006, 00:38
DUP and Sinn Fin back corporate tax cut
By John Murray Brown
Published: November 13 2006 22:40 | Last updated: November 13 2006 22:40
The Democratic Unionists and Sinn Fin, normally sworn enemies, are set to
give their joint backing to a proposal for businesses in Northern Ireland
to be allowed to pay a special low rate of corporation tax.
A paper to be published on Wednesday by the Economic Research Institute, a
local think-tank, proposes that the first 60 per cent of a companys
profits are zero rated, with tax levied at the UK prevailing rate of 30
per cent on the remaining 40 per cent.
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With companies in the Irish Republic paying only 12.5 per cent, businesses
argue that Northern Ireland will continue to find it difficult to attract
new investment and persuade existing investors to stay without a
change in its tax rate.
The proposal is structured to overcome the worries of the Treasury about
breaches in the fiscal uniformity of the UK. However, economists say the
request, if granted by the Treasury, would undoubtedly lead to
beggar-thy-neighbour demands from other UK regions.
The issue has become embroiled in the political stalemate over the
restoration of devolution, with Sinn Fin refusing to give its backing to
new policing arrangements before the DUP agrees to set up the executive.
But tax is proving a rare area of agreement.
Politicians and business leaders believe there is a unique opportunity to
press Gordon Brown, the chancellor, for special tax treatment for Northern
Ireland, which is emerging from three decades of civil strife.
Ian Paisley, the DUP leader, would normally be wary of any suggestion to
harmonise policy between Northern Ireland and the Irish Republic, but he
concedes a tax initiative to bring rates in line with those in the
Republic could be a temporary measure to help build Northern Ireland up.
He says his only real concern is ensuring that Northern Ireland has a
lower rate than the Republic.
Sinn Fin had earlier called for an all-island rate of 17 per cent, a
shift that would mean businesses in the Republic paying more tax than they
do now.
Within the European Union, corporate tax rates are the responsibility of
national governments. However, in July the European Commission ruled that
the special low rate in the Azores, Portugals Atlantic island territory,
was in breach of EU competition rules as it constituted an illegal state
aid to business setting up the region. The Commission has ordered the
Portuguese government to recover the state aid.
The governments other major concern is a possible erosion in the tax
base, if large numbers of UK-based multinationals moved activities to
Northern Ireland to avoid paying the full rate of corporation tax.
In a case before the European Court of Justice this year, the UK Inland
Revenue unsuccessfully challenged the right of Cadbury Schweppes to move
its treasury operations to Dublin to reduce its tax bill.
Copyright The Financial Times Limited 2006
By John Murray Brown
Published: November 13 2006 22:40 | Last updated: November 13 2006 22:40
The Democratic Unionists and Sinn Fin, normally sworn enemies, are set to
give their joint backing to a proposal for businesses in Northern Ireland
to be allowed to pay a special low rate of corporation tax.
A paper to be published on Wednesday by the Economic Research Institute, a
local think-tank, proposes that the first 60 per cent of a companys
profits are zero rated, with tax levied at the UK prevailing rate of 30
per cent on the remaining 40 per cent.
ADVERTISEMENT
With companies in the Irish Republic paying only 12.5 per cent, businesses
argue that Northern Ireland will continue to find it difficult to attract
new investment and persuade existing investors to stay without a
change in its tax rate.
The proposal is structured to overcome the worries of the Treasury about
breaches in the fiscal uniformity of the UK. However, economists say the
request, if granted by the Treasury, would undoubtedly lead to
beggar-thy-neighbour demands from other UK regions.
The issue has become embroiled in the political stalemate over the
restoration of devolution, with Sinn Fin refusing to give its backing to
new policing arrangements before the DUP agrees to set up the executive.
But tax is proving a rare area of agreement.
Politicians and business leaders believe there is a unique opportunity to
press Gordon Brown, the chancellor, for special tax treatment for Northern
Ireland, which is emerging from three decades of civil strife.
Ian Paisley, the DUP leader, would normally be wary of any suggestion to
harmonise policy between Northern Ireland and the Irish Republic, but he
concedes a tax initiative to bring rates in line with those in the
Republic could be a temporary measure to help build Northern Ireland up.
He says his only real concern is ensuring that Northern Ireland has a
lower rate than the Republic.
Sinn Fin had earlier called for an all-island rate of 17 per cent, a
shift that would mean businesses in the Republic paying more tax than they
do now.
Within the European Union, corporate tax rates are the responsibility of
national governments. However, in July the European Commission ruled that
the special low rate in the Azores, Portugals Atlantic island territory,
was in breach of EU competition rules as it constituted an illegal state
aid to business setting up the region. The Commission has ordered the
Portuguese government to recover the state aid.
The governments other major concern is a possible erosion in the tax
base, if large numbers of UK-based multinationals moved activities to
Northern Ireland to avoid paying the full rate of corporation tax.
In a case before the European Court of Justice this year, the UK Inland
Revenue unsuccessfully challenged the right of Cadbury Schweppes to move
its treasury operations to Dublin to reduce its tax bill.
Copyright The Financial Times Limited 2006