The introduction of a new rate of corporation tax in Northern Ireland would necessitate a substantial reduction in public spending with “no guaranteed investment in return” a leading economic think tank has warned today.
The Nevin Economic Research Institute (Neri) believes any decision to reduce corporation tax rates could "undermine the ability" of the North's Executive to invest in what it believe are the essential building blocks for long term growth - innovation and skills.
In its latest Quarterly Economic Observer (QEO), launched today in Belfast, Neri advocates investment in Northern Ireland’s industrial base as the best way to boost wages and productivity across the economy .
Paul MacFlynn, Neri economist, says the North is facing major long term economic challenges and there are immediate issues to be addressed.
“Northern Ireland has for many years struggled to close the gap in productivity with the rest of the United Kingdom. In order to meet this challenge the state must take an active role in boosting innovation in the economy and commit to it financially”
“The current debate surrounding corporation tax is distracting from the long-term investment and capacity building needed in key growth sectors of the economy,” Mr MacFlynn said.
Neri has recommended in its latest QEO that the financial assistance packages currently offered by Invest NI under selective financial assistance should instead be directed towards long-term research and development programmes, particularly in areas such as agri-food, sustainable energy and health and life sciences
According to the institute long term prosperity and social development in the North will be dependent on creating the right conditions for an enterprising state and private sector to flourish.
Neri’s warnings about the implications of any reduction in the rate of corporation tax comes as one of the North’s leading business bodies today hosts its first business event since the UK chancellor Goerge Osborne outlined his corporation tax proposal last week to encourage local firms to plan for the future.
The Northern Ireland Chamber of Commerce's event, Corporation Tax : Seizing the Future , will feature three businesses – Almac, Fane Valley and Novosco – who will share details of their preparations of the possible devolution of corporation tax.
It will also include presentations from key business leaders on the prospect of lower corporation tax rates including Peter Stafford, chairman of A&L Goodbody Northern Ireland and Kevin Kingston, the president of the Northern Ireland Chamber of Commerce and deputy chief executive of Danske Bank.
