Is Lower Corporation Tax A Good Idea?

Politicians and business leaders want to reduce the rate of corporation tax from its current level of 21% to 12.5%. Supporters suggest it will attract more businesses and create thousands of jobs. Critics suggest it will cost up to £300 million pounds a year and will have to be paid for by cutting public services. Who is right?


The Prime Minister, David Cameron, Secretary of State, Theresa Villiers and Chancellor, George Osborne are willing to make the change once all-party talks are agreed.

The Assembly, the Treasury and HMRC are working in the background to ensure a smooth transition for the implementation process.

Business leaders in favour of the change believe it will transform the economy by attracting large companies and helping local companies to grow.

Many civic and union leaders against the change believe it will reward already profitable businesses by making them even more profitable.

Supporters are encouraged by the Chancellor’s acceptance of the argument, whereas, critics are concerned about the effect on public services and public sector jobs.

Regardless of which side is favoured, however, consideration must be given to how a lower rate of tax is introduced once the final decision is reached.


There is no doubt that a significant growth initiative to enable investment in infrastructure, skills and business is needed to boost the long-term prospects of the economy.

In this context, lower corporation tax will act as a catalyst for economic growth, higher-wages, increased productivity and a bigger private sector.

It will create jobs for young people and others by enabling them to work in the region rather than leave to seek jobs elsewhere with little chance of return.

Lower corporation tax will attract home thousands of young and not so young people with a rich array of skills and experience as more and better-paid jobs are created.

It will also benefit small businesses, as the presence of more large companies will provide opportunities for entrepreneurs and local firms.

Most importantly, it will provide hope: hope that the economy will change from stagnation to growth and society will change from past troubles to future prosperity.


Critics highlight that European Commission rules on state aid mean any gain from a lower tax has to be paid for by a reduction in the block grant Stormont receives from the treasury.

This caveat introduces risk as the time lag between the introduction of a new rate and any payback will be hard to predict and difficult to manage.

There may also be unintended consequences as England, Scotland and Wales react to the fact that Northern Ireland will enjoy a more beneficial tax.

One of the ironies is that while a lower rate will help create jobs for young people it may also have a negative effect on education budgets; as a result, getting the timing right between lowering the tax and generating income is vital.

SO, as the debate about lower corporation tax continues businesses will do what they do best: create jobs, generate wealth and help build a better society.