Lobby group backs benefits of cut in corporation tax

The main corporation tax rate in NI is more than twice that in the Republic

The economic body pressing for a cut in corporation tax has said the change would attract more foreign companies to NI.

It follows a report by a consultancy firm which questioned the benefits of a cut in the rate.

PriceWaterhouseCoopers said that any reduction would not necessarily attract significant volumes of new investment.

But the NI Economic Reform Group which lobbies for the change, insisted it would make a difference.

There is virtual cross party support in NI for corporation tax to be cut from its current level of 28% to 12.5 % in line with the Republic of Ireland.

The change has been promoted as a means of encouraging more overseas companies to locate in Northern Ireland.

But the PwC report said there was no evidence that a cut as a single meaon its own, which would cost the Assembly up to £280m a year, would attract significant volumes of new investment.

Better offering

PwC tax partner, Martin Fleetwood, said that based on the Republic's experience, the case for cutting Northern Ireland's corporation tax alone to attract new investment "was not proven".

"From the 1950s, Ireland had three decades of low corporation tax, but comparatively little new investment," Mr Fleetwood said.

"Irish corporation tax actually increased in the 1980s, coinciding with an increase in US investment, so it is hard to invoke low corporation tax as the sole reason for the boom.

"Our research suggests that a variety of factors, of which low corporation tax was only one, contributed to the Celtic Tiger economy.

"An attractive tax regime, with world-class infrastructure and skills, makes a better offering."

However Eamonn Donaghy, from the Economic Reform Group, challenged the findings.

"If you look at the Republic of Ireland over the last 12 month there has been significant foreign direct investment creating a significant number of jobs," he said.

"And that has happened despite the economic woes and the financial crisis."

The Treasury in London is due to publish a consultation document on the corporation tax issue next month.