FSB Calls For Cut In Corporation Tax

With the Republic of Ireland having set their corporation tax rates at 12.5% for small businesses and 15% for larger businesses, it certainly does put Northern Ireland at a disadvantage in comparison, when they and the rest of the UK have a standard 25% corporation tax rate.

A Catalyst For More Investment To Come Into NI

Now the Federation of Small Businesses (FSB) has called for the rate to come down so it is more in line with the Republic, which they believe could be a catalyst for more investment to come into the country and with it more growth.

There was actually legislation passed in 2015 which would supposedly let NI set its own corporation tax rate, however the act has never been formally implemented mainly due to the government veering from one crisis to another. In February the UK government did make a commitment to finally progress its corporation tax devolution commitments and the FSB is keen on this going ahead as soon as possible.

Northern Ireland Should Be Treated As A Special Case

Northern Ireland should probably be treated as a special case with regards to their corporation tax rate. The Republic’s rate is substantially lower than most other countries and so having them right next door puts NI at a massive advantage. The FSB strongly argue that the best way to raise revenues in the country is not to increase corporation tax but reduce the rate, so there will be real growth and then more businesses will be paying their share of corporation tax.

There is certainly a solid argument for that policy to be put into practice. The economy in Northern Ireland is still pretty stagnant and so some new initiatives need to be brought forward in a bid to stimulate growth.

If you are interested here are some details on corporation tax rates across Europe as copied from an article on the Tax Foundation website:

Taking into account central and subcentral taxes, Portugal has the highest statutory corporation income tax rate among European OECD countries, at 31.5 percent. Germany and Italy follow, at 29.8 percent and 27.8 percent, respectively. Hungary (9 percent), Ireland (12.5 percent), and Lithuania (15 percent) have the lowest corporate income tax rates.

On average, European OECD countries currently levy a corporate income tax rate of 21.5 percent. This is slightly below the worldwide average which, measured across 180 jurisdictions, was 23.4% in 2022.