Reducing the Northern Irish Corporate Tax rate of 21% in order to be able to better compete with the Republic of Ireland which has a 12.5% rate has been a topic talked about for at least ten years within the Northern Irish business and political communities. At least that is when I first heard of it, as that is when I had moved permanently to Belfast.  With today’s Chancellor's announcement of “a plan to devolve Corporation Tax to Northern Ireland", the question of whether the Corporate Tax rate will change has effectively been answered with a resounding “YES”!  However, one must wonder just how close we are to getting the rate reduced.  Things move slower here than they do in major cities such as London, Tokyo or New York, and there is also the EEC one has to consider and consult with, so the question of timing comes to the forefront.  Will the Corporation Tax change this year, next year, or in the least at some point within our lifetime?

You must be wondering why I am in such a hurry to see this rate change implemented.  The reason is that the implications of such a change are multi-faceted and to the UK’s advantage. The reduction of the tax rate will afford benefits not only to large multi-nationals establishing their offices in Northern Ireland, but also to start-up and early stage companies that wish to properly structure themselves in order to attract investment and minimise expenditure.  By reducing the Corporation Tax rate in Northern Ireland, the UK is effectively stimulating entrepreneurship and, indirectly, innovation.  The location of UK companies’ incorporation will become more important than ever before; in essence the place of incorporation will become a structuring decision to a larger number of companies than prior, and will be considered alongside other UK governmental tax offerings such as EIS and SEIS status.  (See our blog in relation to the schemes called "SEIS versus EIS - a visual comparison")

Northern Ireland has a highly educated, young work force, most of which desire to make their careers and start their families in the region where they were raised themselves.  And why shouldn’t they? With the political troubles now in the past, Northern Ireland has become a beautiful place to raise a family, so why shouldn’t the young and ambitious be given the opportunity to find challenging work with multi-nationals or innovative start-ups at home? Stimulating growth in highly skilled employment goes a longer way than any budget amount or European grant that may need to be foregone.  New jobs create not only monetary liquidity, but also provide societal benefits such as feelings of well being, hope and aspiration among the residents of the region.

The other reason that I am keen to see this Corporate Tax rate reduced is that it will effectively lessen local business’s reliance on governmental grants.  Call me a raging capitalist, (my favourite book is in fact “The Fountainhead”) but it should be on everyone’s agenda to move away from providing grants in order to attract companies and investment into the region or to keep companies afloat. Northern Ireland has the skill-sets and the resources to compete without such governmental support, and by reducing these types of grants, Northern Ireland moves towards becoming a more "grown-up" economy.  And I am not criticizing the efforts of the regional development agencies such as Invest Northern Ireland; in fact, I truly believe they have done a fantastic job in developing the region, particularly over the past ten years, and they will continue to do so by being rightful ambassadors for the region. But it is time for business in Northern Ireland to advance to the next level; to take off the proverbial training wheels; let us watch her fly.