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Can a fall in corporation tax help create jobs in NI?

Tuesday, 26 June 2012   (0 Comments)
Posted by: SAIT Technical
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By Jim Fitzpatrick (BBC Northern Ireland)

Reducing corporation tax in Northern Ireland to match the Republic's 12.5% rate would help create 58,000 jobs in Northern Ireland by 2030, according to a research paper commissioned by the Department for Employment and Learning.

The analysis, by consultancy firm Oxford Economics, comes on the day we learn that nearly 41,000 jobs have been lost in Northern Ireland in just four years.

The measure of "employee jobs" has dropped in every survey bar one for the last 15 quarters.

That dramatic fall in employee jobs here underlines how much Northern Ireland's economy has to grow to recover the losses of the economic crash.

Although the number of jobs disappearing in the public sector has been increasing this year, it appears that the private sector has taken the biggest hit to date.

Since the peak, nearly 11,000 public sector jobs have gone, but more than 37,000 have been lost in the private sector.

That suggests the efforts to "rebalance" the Northern Ireland economy away from public and towards private sector employment face an even bigger uphill struggle.


All the main parties at Stormont favour reducing corporation tax.

Negotiations with the Treasury are ongoing.

A joint working group comprising the Northern Ireland Office, Stormont and Treasury ministers meets for what is expected to be the final time on Monday.

However any decision from Westminster will not come until later in the summer.

The Treasury will need to be compensated by Stormont for any reduction in tax revenues and it's the process of how this is calculated and administered that is the key focus of the negotiations.

Proponents of the cut say revenue lost to Stormont will not be lost to the local economy because businesses will reinvest their surplus profits. Furthermore, they argue, the reduced tax rate will attract new foreign investment and the overall tax take may, over time, increase.

Invest NI is backing a reduction.

It argues that Northern Ireland's track record for winning inward investment is good, in a UK context, but on a per capita basis the Republic secures 2.5 times the amount.

The report by Oxford Economics indicates that the biggest jobs growth under a lower corporation tax rate would be in high skill areas such as software and science.

Of the estimated 58,000 additional jobs, around half would be created by foreign direct investment, and the rest by local companies.

With 41,000 "employee jobs" lost in Northern Ireland since 2008, and 7,500 in the last year alone. It's clear that even with a low corporation tax rate it will be many years before the jobs market here is as buoyant as it was just four years ago.



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