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Report rules out tax cut demands Report rules out tax cut demands
(about 2 hours later)
A government expert has ruled out reducing corporation tax in Northern Ireland.A government expert has ruled out reducing corporation tax in Northern Ireland.
Cuts to 12.5%, to match the Republic of Ireland, would cost almost £300m a year in lost tax receipts, Sir David Varney's report said.Cuts to 12.5%, to match the Republic of Ireland, would cost almost £300m a year in lost tax receipts, Sir David Varney's report said.
He said it would also displace existing businesses from the rest of the UK.He said it would also displace existing businesses from the rest of the UK.
Companies have been lobbying for a major reduction to promote investment. The top rate of 30% for large companies is to be reduced to 28% by April.Companies have been lobbying for a major reduction to promote investment. The top rate of 30% for large companies is to be reduced to 28% by April.
The report, unveiled on Monday, said a reduced rate of corporation tax for NorthernIreland "would certainly come at a long-term cost in reduced resources to beshared by the UK regions or in the financing of public services". Finance Minister Peter Robinson said he was "disappointed" at the findings.
"The policy would result in a net cost of about £2.2bn over 10 years, with noprospect of full cost recovery over the long run." Speaking on behalf of the Northern Ireland Executive he said: "We will continue to argue the case for a reduction in corporation tax. The issue will not go away."
The vast majority of the 60,000 local companies pay a lower rate of 19% whichis being increased to 22% in 2009. He said a second review was to take place to identify policies and incentives for strengthening and sustaining private sector growth, investment and employment.
Taxation needs to be raised to fund thedelivery of these public goods Varney report Irish Society of Chartered Accountants President Vincent Sheridan said the cut in corporation cax was needed to bed down the peace process.
The Republic's low corporation tax has been a key factor in its economicsuccess. Taxation needs to be raised to fund the delivery of these public goods Varney report
Sir David said there had been little evidence put forward on other differencesnorth and south of the border such as infrastructure, currency or VAT rates. "In terms of foreign direct investment we will miss the one and only opportunity to attract business to Northern Ireland through a globally competitive corporation tax rate," he said.
He added there was uncertainty about the amount of foreign direct investmentthat would flow from the cut. The Varney report, unveiled on Monday, said a reduced rate of corporation tax for Northern Ireland "would certainly come at a long-term cost in reduced resources to be shared by the UK regions or in the financing of public services".
"The academic evidence is that skills, rule of law, industrial relations, thepotential for innovation and the quality of infrastructure are more important indetermining the 'business fit' of potential investment," the report said. "The policy would result in a net cost of about £2.2bn over 10 years, with no prospect of full cost recovery over the long run."
"Indeed in many of these areas, taxation needs to be raised to fund thedelivery of these public goods." The vast majority of the 60,000 local companies pay a lower rate of 19% which is being increased to 22% in 2009.
Sir David said the £51.5bn financial and economic package agreed with theTreasury last May and the peace process created the right platform for a properbusiness environment. The Republic's low corporation tax has been a key factor in its economic success.
A major investment conference is planned for next spring to attract UScompanies. Sir David said there had been little evidence put forward on other differences north and south of the border such as infrastructure, currency or VAT rates.
Improving skills, reducing the size of the public sector relative to theeconomy as a whole and increasing the number of business start-ups were allrecommended in the 132-page report. He added there was uncertainty about the amount of foreign direct investment that would flow from the cut.
"Promoting entrepreneurship, spending more on research and development,increasing the ratio of capital to workers in the economy and the percentage ofthe workforce with higher qualifications all have a significant bearings onregional labour productivity," it said. "The academic evidence is that skills, rule of law, industrial relations, the potential for innovation and the quality of infrastructure are more important in determining the 'business fit' of potential investment," the report said.
"Indeed in many of these areas, taxation needs to be raised to fund the delivery of these public goods."
Sir David said the £51.5bn financial and economic package agreed with the Treasury last May and the peace process created the right platform for a proper business environment.
A major investment conference is planned for next spring to attract US companies.
Improving skills, reducing the size of the public sector relative to the economy as a whole and increasing the number of business start-ups were all recommended in the 132-page report.
"Promoting entrepreneurship, spending more on research and development, increasing the ratio of capital to workers in the economy and the percentage of the workforce with higher qualifications all have a significant bearings on regional labour productivity," it said.