The UK government’s move to raise corporate tax to 25 percent, twice the Republic’s rate of 12.5 percent, poses an “acute” challenge for Northern Ireland, said the head of the Northern Business Lobby.
Angela McGowan, the Confederation of British Industries (CBI) regional director for Northern Ireland, said the move, which is part of a series of measures announced by UK Chancellor Rishi Sunak in Wednesday’s budget, may undermine the North’s ability to deal with the Republic to compete for foreign direct investment (FDI).
“The decision to jump corporate tax to 25 percent will take a sharp breath for many companies and send a worrying signal to those planning to invest across the UK,” she said.
“For many years, companies have been keen to have a corporate tax rate equivalent to that in the Republic of Ireland. This would ensure the region can compete for investment on an equal footing across the island, ”said McGowan.
The 2015 Fresh Start Agreement between the Irish and UK Governments and the main northern parties gave Stormont the power to levy a lower corporate tax rate and required it to align the North’s tax rate more closely with that of the Republic.
It was never reacted to, however, as it would mean a reduction in the block grant the North receives from Westminster each year.
“This is an issue that deserves a lot more attention when we think about long-term economic growth at the regional level,” said McGowan.
In order to pay for the ongoing Covid-related support for companies and employees, Sunak announced that it is planning to do soCorporate income tax increased from 19 percent to 25 percent Cent from 2023.
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The higher rate would only apply to companies with profits in excess of £ 250,000 (EUR 289,710). Those with a profit of less than £ 50,000 will continue to pay the existing 19 percent rate. The measure is expected to raise up to £ 17 billion by 2025/2026.
The corporation tax increase is the first since 1974. Previously it was only kept at the same level or decreased.
Former British Chancellor George Osborne signaled a willingness to cut business tax to less than 15 percent in order to make Britain an investment magnet.
Corporate tax revenues in the republic reached a record EUR 11.8 billion last year and now account for more than EUR 1 in every EUR 5 tax levied by the government, with a small number of large multinational corporations making a significant contribution Contributes tax revenue.