Strong Case for Corporate Tax ‘Gamble’ to Boost Northern Ireland Economy – Paul Johnson
Devolving corporate tax in Stormont would be a gamble, but could be worth it to transform the underperforming northern economy, according to the chairman of the new Northern Ireland Tax Commission.
Paul Johnson is the director of the prestigious Institute for Fiscal Studies. He is also leading the group of academics and economists tasked with examining the possibility of giving more fiscal powers to the executive.
In its interim report, the Fiscal Commission said it would prioritize income tax; taxes on fuel, alcohol and tobacco; stamp duty property tax; duty of air passengers; the apprenticeship tax and the landfill tax.
He said that while delegating corporate tax is justified, he won’t go any further because of the volume of work already done and the Treasury’s skepticism about Stormont’s readiness.
This follows a recent letter from Britain’s Chief Treasury Secretary to Finance Minister Conor Murphy, telling him the executive has yet to be able to demonstrate that its finances are sustainable over the long term.
Commissioners said that as a result the Treasury chose not to engage with them as fully as they did with similar commissions looking at tax devolution for Scotland and Wales.
READ MORE: Tax increase options for Stormont outlined by new commission
The Tax Commission said it was now up to the executive and the Treasury to come to an agreement on the issue.
Corporate tax is currently increasing by around £ 810million a year in Northern Ireland, a fraction of the £ 12 billion the Republic is expected to raise this year from its low rate of 12.5%.
Even though Dublin has pledged to raise corporate tax to 15%, the gap is still widening, with the UK on track to cut from 19% to 25% by 2023.
Paul Johnson said delegating the tax to Stormont and reducing the rate would result in significant upfront costs.
ANALYSIS: Getting fiscal powers is one thing, using them can be another
But he added: “The case for lowering corporate taxes in Northern Ireland is quite strong, given the need to stimulate the economy and the proximity to the Republic.
“Sure, it’s a bet because it’s an upfront cost, but it could be a bet worth taking.
“It’s one of those big political decisions. Are you ready to take this bet, given that Northern Ireland’s economy is not in the right place at the moment?
“It is very striking that on just about any measure, whether you look at income or earnings or employment or productivity, that Northern Ireland is right there in the bottom three regions of the world. United Kingdom, “he added.
“This [corporation tax] could be a tool that could make a big difference, but you could end up with less tax revenue in the medium term.
Last night, Chartered Accountants Ireland called on the executive to put the issue back on the agenda.
“A clear and credible statement of intent from the NI executive on how delegated powers would be used as well as meaningful engagement with Her Majesty’s Treasury on bulk grant and borrowing powers is needed to get things done, ”said professional body president Paul. Henri.
“The complexities of activating corporate tax devolution are not new, but now is the time to act and take a fresh look at how the economy of Northern Ireland can. stabilize by implementing a lower corporate tax rate so as to minimize the cost of the block grant and address the well-known complexities of this problem.