BELFAST: Around 32,000 jobs could be created and an additional £4bn thrust into the Northern Ireland economy over the next 15 years as a result of cutting corporation tax.
That’s according to a major new report by the Ulster University Economic Policy Centre, which was commissioned by the Department of Enterprise, Trade and Investment, into what impact cutting the business rate to 12.5% could have on the economy here.
But while it predicts a surge in job creation in the long-term, due to the cut in Stormont’s block grant from Westminster, employment levels are predicted to fall, primarily in the public sector.
But while Chancellor George Osborne’s announcement (right) that he would be cutting the levy across the UK from 20% to 17% by 2020 means it shrinks the gap and the shortfall Northern Ireland would have to pick up, some believe it also means the new low rate will be less attractive to foreign investors.
The report says the introduction of the UK-wide rate will “reduce slightly, the costs, benefits and net impact of implementing a reduced rate”.
And it states that the 32,000 job prediction is based on the UK Government’s previous tax rate.
It says the benefits of a reduced rate include attracting around 1,000 new jobs each year from fresh foreign direct investment, existing firms expanding along with indirect knock-on effects on other sectors, such as increased spending elsewhere in the economy.
In its conclusions, it says “implementing a reduced rate of corporation tax has the potential to make a substantial positive impact on the Northern Ireland economy by attracting new firms to the region…and allowing existing firms to retain additional profits to re-invest and create more economic activity.
“Local firms will benefit from the arrival of new FDI and expansion of existing companies, as supply chains expand and wages are spent.
“A reduction in the rate of corporation tax will help to move Northern Ireland towards a more sustainable economic future with a reduced dependency on the public sector, more people in work and many more global firms located within its shores.”
Northern Ireland will be able to set its low 12.5% rate of corporation tax – in line with the Republic’s – from April 2018. While the bulk of business groups have lobbied and called for a cut in corporation tax, some are more sceptical about the impact it could have on Northern Ireland’s economy.
Nevin Economic Research Institute (Neri) economist Paul Mac Flynn said celebration over getting a lower rate in 2018 “doesn’t pass” muster.
Meanwhile, the report also says a lower rate of corporation tax “will not, however, be the only policy initiative that is required in Northern Ireland”.
“In fact, the potential benefits may be at risk if the policy environment is not conducive to delivering the required skills, infrastructure and marketing.”
