Tax Cut Could Help To Rebalance Our Economy

Things have been improving, but it’s been tough. As such, the announcement on corporation tax is a welcome shot in the arm and will improve business owner confidence.

Much of the focus on corporation tax has (to date) focused on macro level factors alongside the global business implications for NI. We all hope the move will lead to greater inward investment and attract large corporations, as has happened in the Republic.

The large blue chip companies and their evolution within the Republic is a well-documented economic success. The Republic’s private sector has been transformed, with the likes of Google and Apple providing thousands of jobs.

While it would be naive to dismiss the positive implications that the new rate could have for inward investment and employment, the key question I keep coming back to is not what might happen if we have a Google or Amazon headquarters here, but what will the announcement do for our entrepreneurs, start-ups and small business owners?

Small and medium sized enterprises (SMEs) make up the largest proportion of businesses here at present. Thus it is prudent that we consider whether a cut in corporation tax will have a positive impact on growth, employment and investment for the small companies which are the lifeblood of our economy, or whether the move could be detrimental in the long term.

I have read various arguments which claim the rate cut could actually create a financial loss (in terms of money taken from the block grant), with some arguing that business owners will opt to keep the tax saving and pay it to themselves as a bigger dividend.

While some business owners may opt to retain new tax savings for dividend purposes, my view is that many won’t. Business owners by their very nature want to build a better business, they want to expand and grow, and in my opinion, they will use the saving to employ more people and invest the money in making their organisations better.

After speaking to a number of business owners, I believe that any potential savings will go right back into the business on the employment of people, investment in plant and machinery and other infrastructure investment to improve the business. Like many across the legal sector, I welcome any move that benefits the private sector in Northern Ireland.

However, I think the longer we have to wait for its implementation, the less of an impact it could have. Public services need to be supported and financed, but so does our private sector.

We now need to create the best possible environment for the new tax conditions to flourish, so the much vaunted and needed rebalancing of our economy from reliance on public and on to an invigorated private sector has some chance of gathering pace.

l Andrew Walker is managing director of Walker Legal.

Contact Walker Legal at 6 Bridge Street, Portadown, BT62 1WL, tel: 028 3833 7591 and Scottish Provident Building, 7 Donegall Sq West, Belfast, Co Antrim, BT1 6JH, 028 9091 8461

Tax cut could help to rebalance our economy