11 January 2008
A government review has rejected proposals to cut Northern Ireland's corporation tax rate to below that of the rest of the UK.
The Northern Ireland Executive wanted to reduce the tax from the UK rate of 30% to the 12.5% applicable in the Republic of Ireland.
The review – conducted by Gordon Brown's adviser Sir David Varney, former chair of Revenue & Customs – concluded that a lower rate for Northern Ireland would cost the rest of the UK about £2.2bn in lost tax revenues over ten years, but could not be guaranteed to significantly increase economic activity.
'Profit-shifting' from the rest of the UK would create a major burden on Revenue & Customs in terms of policing the revised system, he said.
Varney suggested that improving labour market skills and cutting the public sector to the equivalent size of the rest of the UK were more likely to produce economic growth.
Chancellor Alistair Darling said: 'The government accepts [Varney's] finding that there is no convincing case for such a change.'
He added that Varney would now undertake a second review to consider economic policy in Northern Ireland.
Finance Minister Peter Robinson, speaking for the Executive, expressed 'disappointment' at the decision.
PFjan2008
