Could Northern Ireland Get Lower Corporation Tax?

In Northern Ireland, businesses face a unique challenge. Compared to their counterparts in Ireland, who benefit from a favourable 12.5% corporation tax rate, Northern Ireland’s companies are faced with heftier tax bills, sometimes twice as much. This discrepancy is one of the reasons why Chartered Accountants Ireland, representing over 5,000 members in the region, is raising its voice.

For context, the Northern Ireland Executive, which should be addressing these disparities, is currently non-functional. This has stymied the potential of many companies to take advantage of the unique opportunities the region offers.

The Northern Ireland Investment Summit

This week, Northern Ireland hosted an investment summit, showcasing its best attributes to prospective investors and global business leaders. Janette Burns, chair of the Northern Ireland Tax Committee of Chartered Accountants Ireland, highlighted this as an excellent platform to demonstrate Northern Ireland’s prowess, especially in the innovation and technology sectors. However, she also pointed out the elephant in the room: the region’s high corporation tax.

Burns mentions, “Many companies in the region are seeing a substantial decrease in their cash flow due to a near 32% increase in corporation tax bills.” This, when combined with inflation, results in much lower after-tax profits. The outcome? Reduced funds to reinvest in the company, reward employees, or create new jobs.

The Vision for A New Tax Rate

The idea of aligning Northern Ireland’s corporate tax rate with Ireland’s is not new. Experts argue that a 12.5% rate would provide the businesses in Northern Ireland with a competitive advantage. This would be particularly appealing for foreign investments, and local businesses would thrive too.

“The benefits of reducing the rate, and the measures required to make it happen, are well-established,” says Burns. She emphasizes the necessity of the Northern Ireland Executive’s reinstatement to address not only this but several other pressing concerns spanning education, healthcare, economy, and childcare.

Paul Millar, chairman of Chartered Accountants Ulster Society, chimed in on the issue. He reminded that the Investment Summit underscores the importance of a lowered corporation tax rate in enhancing Northern Ireland’s appeal as an investment destination. Millar said, “There have been whispers from political circles about possibly reducing the tax rate. But so far, it’s been all talk and no action. This isn’t aiding businesses struggling to manage their tax liabilities.”

The Road Ahead

Despite the numerous crises Northern Ireland companies have faced in recent years, they have shown remarkable adaptability and resilience. Millar stresses that these companies should now be equipped to prosper. He believes that as inflation starts to diminish, it’s time for politicians to take action.

His concluding thoughts were an appeal to political parties to come together: “We urge our political factions to move beyond their individual agendas and collaborate for the welfare of the entire region and its people.”