10th Oct 2007
Varney report to reject corporation tax cut in NI on dodgey grounds
The report commissioned by the British Government to trash any idea of a reduced rate of corporate tax in Northern Ireland is expected out very soon. Gordon Brown, when still chancellor, asked Sir David Varney to do a good old fashioned hatchet job on the idea and all the suggestions are he will not disappoint his political master.
There has been a vigorous campaign here on the island of Ireland in favour of a reduction in the rate. The CBI, IoD, Southern Government and the Northern Executive have all lined up in support, meanwhile the British government have mounted quite a fight back. Their most senior diplomats on this island have been expressing their ‘concerns’ to anyone who will listen and a small number of academics and commentators have dedicated themselves to undermining the arguments in favour of the cut.
Weber Shandwick has been working with the Institute of Chartered Accountants in Ireland to rebut some of these rumours. During the week at a press briefing in Belfast the ICAI’s Director of Tax, Brian Keegan, said clearly there were no legal or technical reasons why there could not be a separate rate for NI. And he is right. Varney is reported to have told consultees the Azores Judgement was a huge issue when in fact the British Government defended Portugal’s right to introduce different rates within its jurisdiction and the European court took issue not with the concept of a variable rate but with the fact that the Portuguese had implemented the change without first consulting them.
People close to the Treasury and Varney have also been spreading the word that a reduction in the rate will leave a big hole in tax take. Not so. In the Republic, since its reduction in the mid nineties the overall tax take has actually increased. Fact is the lower tax has been such an incentive for businesses to grow and the public purse is now better off with a lower rate.
Eamonn Donaghy, the ICAI’s Northern Tax Committee Chair, has linked this possible boost in government revenues to the North’s huge over reliance on British Government subsidies. No better way to make the North less of a burden on the rest of the UK in the long term than by creating opportunities for new and increased tax revenues locally.
You can tinker all you like with special incentives for one sector or allowances for another but the one thing that works through the business chain and is open and easily communicated at home and abroad is a low headline rate. That is what people want in NI and to be frank after the past thirty years they deserve a break.
The ICAI have been lobbying members of the Northern Ireland Affairs Committee and have secured considerable support for an inquiry into the Varney report when it is published. This is essential if the Varney spin is to be tackled and the campaign kept alive.
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