Posted on Thursday 9 July 2015 by Ulster Business

Ni business tax benefits pique republics attention

Ibec Head of Policy and Chief Economist Fergal O'Brien

The business tax benefits which Northern Ireland can offer are drawing envious glances from an unlikely source – the Republic.

The Irish Business and Employers Confederation (Ibec) - the group which represents Irish business – has warned the UK is fast becoming a more attractive investment location to the Republic’s detriment.

It follows the Chancellor’s announcement in his emergency budget of a cut in UK corporation tax to 18% by 2020, a fall from the current level of 20% and a continued narrowing of the gap to the Republic’s enviable 12.5% business tax rate.

Ibec Head of Policy and Chief Economist Fergal O'Brien said the UK has a potent offering to potential investors when the tax rate is combined with tax reliefs for innovative companies.

"A cut to the UK corporate tax rate, along with recent innovation tax incentives, mean the UK now has one of the most attractive tax offerings in Europe,” he said. “In contrast, Ireland's attractiveness was significantly eroded during the crisis, particularly due to higher taxes on work.”

And Northern Ireland’s competitiveness could be improved still more if plans to devolve corporation tax setting powers get the go-ahead, a move which would allow Stormont to cut the business tax here further.

The successful lobbying for the devolved power was initially a way of eventually lowering corporation tax in Northern Ireland to 12.5% but, following George Osborne’s cut to the UK-wide rate, there have been calls for a further cut to 10%.

That will make Northern Ireland’s tax rate much more attractive to investors and could be affordable because it will cost less from the Westminster block grant, according to Northern Ireland Chamber of Commerce head Ann McGregor.

“Cutting the UK Corporation Tax rate to 18% by 2020 will cut the cost to the Northern Ireland Block Grant as Northern Ireland looks to implement its own rate of 12.5%. Although this is welcomed, Northern Ireland could now consider implementing an even lower rate (for example 10%), which would put Northern Ireland at a competitive advantage over the Republic of Ireland.”

But the Republic’s willingness to offering a tax friendly environment to business hasn’t been diminished and it’s not ignorant of the competitive threat Northern Ireland poses, nor of what it has to do to remain in contention.

"We need to improve our tax offering if we are to attract the next wave of investment,” Ibec’s Fergal O'Brien said. “We need to make it more attractive to start up a new business and we need to cut our personal income taxes to attract and retain the best talent. Government must also deliver on its commitment to ensure that support for innovation, through the knowledge development box, is the best in class."

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