Cutting N. Ireland’s Tax Could Create 90000 Jobs

February 17, 2010 Taxation in UK

Stormont the seat of government in Northern IrelandAccording to a report released by the Northern Ireland Economic Reform Group (NIERG), reducing Northern Ireland’s corporate tax rate to 12.5 percent could create 90 000 new jobs within two decades.

The NIERG has claimed that the Northern Ireland Government’s current tax rate of 28 percent , and scheme of awarding grants to businesses, is not sustainable, and needs to be changed soon in order to spurn the nation’s economic development. Projections within the report show that reducing the corporate tax rate to the lowest EU allowable level will ultimately have a positive long term effect on Northern Ireland’s tax revenues and employment. The immediate consequence of the tax cut will be a £200 million drop in corporate tax revenues with further effects across income and Value Added taxes. It is estimated that the decision will result in a cumulative tax loss for eleven years, whereupon an increasingly positive effect will be seen. Within 20 years of the lowered corporate rate an approximated 90 000 new jobs would be created, many of them at a pay rate above Northern Ireland’s average salary.

The group’s report A Case for a Reduced Rate of Corporation Tax in Northern Ireland claims that despite of heavy government support of virtually every sector of the economy, it is still the UK’s poorest region, and looming EU regulations could prohibit the use of Government business grants by 2013, leaving Northern Ireland with no means of attracting businesses. Further, Northern Ireland is overly dependent on taxes raised across the UK, especially in South East England. Without the tax outflows towards Northern Ireland, South East England would retain an approximate £42 million annually, making the benefits of the tax cut extend across the entire UK.

The NIERG is an independent body consisting of economists, accountants and prominent business figures from across Northern Ireland who “wish to see a more successful and competitive NI economy, less dependent on a public sector subvention from taxpayers in Great Britain.”

Photo by Andrew B47