BRITISH PRIME minister David Cameron will have the final call on demands to give Northern Ireland freedom to cut its corporation tax rate to match the Republic’s.
The decision was taken at a meeting in the treasury in London yesterday involving treasury and Northern Ireland Office ministers and the North’s Finance Minister, Sammy Wilson.
The joint report from the ministerial working group will “set out the points of agreement”, but would also recognise that a final estimate of the costs “remain to be resolved”, sources said last night.
Under the proposal favoured by Stormont ministers, Northern Ireland would be given powers to match, or undercut, the Republic’s 12.5 per cent rate, which they see as the North’s main competitor for foreign investors.
However, Stormont estimates that it would cost £200 million in taxes, while the Treasury argues that the bill would be £700 million. The figure chosen is crucial since it will be deducted from the subsidy received from London. Last week, the North’s Enterprise Minister Arlene Foster said a decision on cutting the rate to 12.5 per cent had to be made this year.
Significantly, Northern Ireland Secretary of State Theresa Villiers, speaking alongside Ms Foster, emphasised that a decision had constitutional implications.
British ministers are fearful that giving powers to Northern Ireland to vary tax rates – even if that can be agreed with the EU – could spark demands from Scotland, which holds an independence referendum in 2014.
Mr Cameron will, most likely, seek to buy time, though some argue that he could make a change so financially unacceptable for Stormont that it would not use the powers, even if they were granted.
