Northern Ireland Corporation tax rate 'drives business south'

In the past five years, 21 companies that were in talks with Invest NI about setting up in Northern Ireland subsequently decided to go south of the border to the Republic of Ireland. The Department of Enterprise, Trade and Investment says that the lower corporation tax in the Republic was most likely a factor, though infrastructure and skills may also have been issues.

The matter came to light when Sinn Fein MLA Paul Butler submitted a written Assembly question to Arlene Foster, who advised that it is not always possible to ascertain why companies decide not to proceed with investment in Northern Ireland because of 'commercial sensitivities', but that corporation tax may have been a factor.

The main rate of corporation tax in the Republic of Ireland is 12.5%, less than half of the 28% rate currently applicable in Northern Ireland. Consequently, all the main political parties of Northern Ireland have been lobbying for a reduction in the tax rate with a view to stimulating investment in the province.

A review was carried out in 2007, led by Sir David Varney, and suggested that the long-term benefits of a reduction in the tax rate would not outweigh the short-term impact on revenue.

Drew Nesbitt of Wilson Nesbitt solicitors added:

"While many people believe that Sir David Varney missed an opportunity to increase the attractiveness of Northern Ireland as a location for investment by Foreign Companies these comments should be considered in light of the economic situation in the Republic of Ireland, falling levels of Foreign Direct Investment, with many Companies now choosing Central and Eastern European countries due to reduced wage cost, and the potential outcry from other UK regions in the event that Northern Ireland was given special status."

If you require legal advice in respect of a company matter, such as the formation of a company, or a purchase or sale, contact Wilson Nesbitt solicitors in Belfast by emailing .

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