Call for reduced corporation tax rate in Northern Ireland

Corporation tax rates must be slashed in Northern Ireland to help firms compete on an equal footing with the booming Irish economy, a coalition of business organisations is urging the chancellor. The plea, supported by political parties across the province, is made amid hopes that fiscal aid might help to break the political stalemate and revive the Stormont assembly.

The Treasury is likely to resist the idea of different levels of corporation tax in different parts of the United Kingdom, but the campaign aims to draw attention to what is increasingly seen as the main obstacle to local business growth.

Corporation tax in the Irish Republic is only 12.5% - which has encouraged computer and software multinationals to invest in new plants. In the UK the rate is 30%. With unemployment below 5%, it is difficult to argue that the province is Britain's most deprived region. Instead, it bases the argument on its unique geography as the only area that shares a land border with a more affluent country.

Dr Michael Maguire, chairman of the Institute of Directors in Northern Ireland, believes lower corporation tax rates would reduce the province's over-reliance on the public sector. "At present 66% of the economy here is dependent on the state," he said. "The business community is calling for a restructuring of the public sector ... and lower corporation tax would stimulate growth in the private sector. We need some fiscal flexibility to help develop growth and equalise the differences between the north and the south."

The CBI and the Chamber of Commerce in Northern Ireland have endorsed the campaign. The Democratic Unionist Party trade and industry spokesman, David Simpson, supported the call this week. "Our land border with the Irish Republic accentuates the problem. Northern Ireland would be every bit as attractive to inward investment as the Republic in terms of language, location, educational attainment, skills levels and infrastructure but the lower corporation tax rate does not make for a level playing field.

The Ulster Unionist Party has backed the proposal saying it is needed to make Northern Ireland more competitive. Sinn Fein has suggested harmonising the tax rates in the two states at about 18%.