Committee supports lowering of NI corporation tax

Sterling notes Supporters argue that a cut in corporation tax would be good for the NI economy

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An influential Westminster committee has said there is a convincing case for lowering corporation tax in NI.

The Northern Ireland Affairs committee said a reduction could boost the private sector and help innovation and exports.

It said it is up to the Stormont executive to decide what rate it should be lowered to.

The current rate is 28% compared to 12.5% in the Republic.

The committee was however critical of the Treasury and said it was "surprised to discover that HM Treasury do not know how much corporation tax is raised in Northern Ireland".

The Chair of the NI Affairs Committee, Lawrence Robertson MP, has called on the government to examine the report.

He said the evidence his committee had received from trade unions, economists and politicians "formed a convincing argument for a lower rate in Northern Ireland".

A government consultation paper examining the case for lowering corporation tax rates in Northern Ireland was published in March.

The overall UK rate is 28% and will fall by 5% over the next four years.

The NI Affairs committee report acknowledges that there is still not complete clarity on the legality of the proposal to cut the tax in NI.

The committee said it is "confident" the plans meet the criteria of the relevant piece of EU law, known as the Azores judgement.

However, it adds that "it is difficult to know how the European Court of Justice would apply the judgement in a new situation".

One of the witnesses to the inquiry, Rosa Greaves, professor of European Commercial Law at the University of Glasgow, said that two recent cases relating to the Azores ruling have only been ruled on by national courts, not the European Court.

She said: "The gate was opened but we don't know how wide," and "it needs a European Court of Justice decision to be final".

The government told the committee there has so far been only one informal meeting with the EU to discuss this matter.

The committee also acknowledged that a cut in the tax would create a form of "rough justice" where banks and utilities companies would experience a windfall gain without creating any new jobs.

EU law means that any cut could not be applied preferentially to particular sectors, and could not be refused to particular sectors.

The committee concludes that "such rough justice does not invalidate the wider benefit of adopting a lower rate".

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