The recent publication of the Bill to enable the devolution of Corporation Tax in Northern Ireland from April 2017, has been warmly welcomed by political and business leaders alike as an important milestone in our economic history. It has been a long road to get to this point and it has only been possible thanks to the perseverance and persuasive arguments made by many in our business community over a period of years.
The ability to set a reduced rate of Corporation Tax would significantly add to the attractiveness of Northern Ireland as an investment location for existing and potential new investors and bring benefits to our local business base.
Of course, we continue to have levers to support economic development that are not dependent on a lower rate of corporation tax, such as our talent pool and support for R&D, and which contribute to our overall proposition of a skilled workforce, a competitive cost base, government support, and proximity to markets or customers.
The recent success which we have enjoyed indicates that our current strategy is the correct one, and that we should continue to focus on software, ICT, Financial Services and Business & Professional Services.
However, the potential to reduce the Corporation Tax rate will both complement and enhance this proposition to a combination of tax and talent in a value for money environment, which could make us the most attractive investment location in Western Europe, based on a low corporate tax rate and strong value proposition.
A reduction in corporation tax would also open the door for us to win investment from new sectors which tend to have high levels of R&D intensity, salaries, productivity and export orientation, such as Life Sciences.
Our competitive positioning for cost sensitive manufacturing projects could also be enhanced. A particular attraction of this is that such projects have less of a requirement to locate in our major cities, giving the opportunity for the benefits of reduced corporation tax on a sub-regional basis.
We have around 80 university groups in Northern Ireland undertaking research, a number of which are “world leading” and all operate in high value sectors. A reduced rate of corporate tax would help attract further linkages between business and universities to drive higher levels of research.
There will also be significant and immediate benefits to our local business base, the vast majority of which are SME’s. The ability to retain more of their profit would release additional capital for businesses to invest in their future growth, create employment and provide an immediate impetus to grow the private sector in NI. This is particularly timely given the recent regulatory changes in EU State Aids and the more general pressures on public sector funding will inevitably mean that companies will have to become less reliant of grant funding.
However, we know that the hard work to capitalise on this very positive development for the Northern Ireland economy is only beginning. As Minister Foster said last week, when welcoming the publication of the Bill, we need to ensure that we have the right offering in areas such as skills and infrastructure that a growing private sector needs.
We have already begun to ensure that our sales proposition is tailored for a low corporation tax environment and this work will now accelerate.