Devolve corporation tax setting powers to Stormont to maintain business competitiveness - KPMG
A REFORMED Stormont Executive can counter the burden on the north’s large businesses from the upcoming hike in UK corporation tax by devolving tax setting powers to Stormont, KPMG Northern Ireland has said.
The firm said such a move – sanctioned by Westminster in 2015 – would give Stormont the ability to lower the business tax in the province to a level on a par, or even below, that applied in the Republic.
The comments come following a Spring Budget where Chancellor Jeremy Hunt confirmed the planned April hike in the main rate of UK business tax to 25 per cent from 19 per cent for businesses with taxable profits above £250,000 a year. The level is twice that faced by RoI businesses where the tax is just 12.5 per cent.
The right to devolve corporation tax-setting powers to Stormont came in 2015 after a years-long campaign by business bodies and others in Northern Ireland but, as a result of the main rate of corporation tax falling in the interim period, it has yet to be enacted.
With the gap between the main rate of corporation tax in the two jurisdictions now set to widen, the focus is again on the potential for Northern Ireland to set its own rate, something which would need a fully functioning Executive back up and running.
Johnny Hanna, partner in charge of KPMG in Northern Ireland, said: “The growing tax rate differential makes it difficult for businesses here to compete with their peers in RoI and it also lessens Northern Ireland’s appeal as an investment destination.
“But there is a way for the province to counter that challenge by enacting the Corporation Tax (Northern Ireland) Act passed by Westminster in 2015.
“It devolves tax-setting powers to Stormont and would allow the Executive to set a comparable, or more competitive, rate. Crucially, however, such a move would require the return of the Assembly who could use their tax-setting powers as one of a number of tools at their disposal which could set Northern Ireland on the path to greater prosperity.”
Mr Hanna said lower corporation tax combined with access to both European Union and UK markets would make Northern Ireland a prime business and investment destination.
“Combined with the benefits of dual market access offered by the Windsor Framework and the range of city deals currently being rolled out, lower corporation tax would allow businesses here to compete on an even footing and prime the local economy for prosperity in the coming years.”