Northern Ireland May Get Corporation-Tax Autonomy, Osborne Says

Northern Ireland’s semi-autonomous government will be able to set its own company-tax rates once local politicians show they’re able to manage the implications, U.K. Chancellor of the Exchequer George Osborne said.

The U.K. government will introduce legislation allowing the multiparty administration in Belfast to control its own corporation tax depending on the outcome of talks with politicians from the province, Osborne said in his end-of-year update to Britain’s Parliament in London today.

“We recognize the strongly held arguments for devolving corporation tax-setting powers to Northern Ireland,” Osborne said. “It can be implemented provided the Northern Ireland executive can show that it is able to manage the financial implications.”

Prime Minister David Cameron is grappling with demands for more power from nations and regions across the U.K. The government has reached an agreement with the Welsh administration to hand over control of local company taxation -- known as business rates -- and supports recent proposals that Scotland take control of income tax raised in that country, Osborne said.

“The argument for devolution of this power has now been accepted by all the main U.K. and Northern Ireland parties,” Eamonn Donaghy, head of tax at KPMG in Belfast and spokesman for trade group Grow NI, said in an e-mailed statement. “It’s up to our leaders here to ensure that this important economic lever is delivered.”

Others Blamed

Northern Ireland’s first minister, Peter Robinson, said his Democratic Unionist Party had “taken all the necessary hard decisions relating to the economy, welfare reform and the budget” to allow tax powers to be passed to Belfast. “The failure of other parties has caused this delay,” he said in an e-mailed statement.

The Northern Ireland executive was established after a 1998 peace deal ended decades of conflict between paramilitary groups and British security forces. The devolved government has been lobbying to set its own corporation tax rate so it can compete with the Republic of Ireland, which has one of the lowest rates in the European Union.

The U.K.’s main corporation-tax rate is 21 percent and will fall to 20 percent in April next year. That compares with 12.5 percent in the Irish Republic.

“Northern Ireland was clearly at a disadvantage up until now and this is likely to level the playing field,” said Alan McQuaid, an economist in Dublin with Merrion Capital. “Whether it will have negative knock-on effects for the republic remains to be seen.”

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