Budget2011: Northern Irish corporation tax a “mistake”

Budget2011: Northern Irish corporation tax a "mistake"

Proposals to consult on a separate corporation tax in Northern Ireland is unlikely to help businesses, tax expert says

A POTENTIAL separate corporation tax for Northern Ireland is a mistake, Deloitte’s head of tax has said.

The government has said it will publish a consultation paper tomorrow on devolving corporation tax in Northern Ireland. This is to “deal with the unique issues posed by the Irish Republic’s business tax regime”, chancellor George Osborne said.

But Bill Dodwell said that this is unlikely to help Northern Ireland’s economy. “The reason Ireland has been successful has been purely because it has managed to entice US multinationals,” he said. “US multinationals pay 40% of the whole of Ireland’s corporation tax revenue. There is nothing to suggest there is an equivalent investor base out there that will move to NI from a third country.

“The likelihood is you will divert from the rest of the UK,” he added.
European Union regulations state that tax losses incurred through a region having a separate corporation tax will have to be paid for by that region.

This could result in a lower grant for Northern Ireland, which would effectively mean the man in the street paying for a tax cut for businesses, he added.

Furthermore, the problem of transfer pricing from the UK will only be resolved “with great difficulty”.

However, Kevin Hindley, managing director of Alvarez & Marsal, said that this was an “excellent idea”.

“At the moment, Northern Ireland loses out on inward investment due to the very attractive tax regime south of the border. A move to bring the corporation tax rate in Northern Ireland more in line with the Republic (currently 12.5%) is clearly needed. I have clients in Northern Ireland that feel the pressures that come from the differential in the Republic,” he said.

This will not be entirely straightforward, he added. “Companies operating in both Britain and Northern Ireland would presumably need to allocate profits between the mainland and the province. It is helpful that a period of consultation is envisaged in order to assist with these issues.”

Mike Warburton, tax partner at Grant Thornton, welcomed the move. “Northern Ireland suffers from corporate tax regime in the Republic. There is a case to be made for a separate tax regime,” he said.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource