Letter from the Rt Hon Yvette Cooper MP,
Chief Secretary to the Treasury, to Sir Patrick Cormack MP, Chairman
of the Northern Ireland Affairs Committee
TAX POLICY IN NORTHERN IRELAND
1. I apologise for the delay in replying. Thank
you for your letter of 13 March to the Chancellor, to which I
have been asked to reply.
2. I am grateful to you for sending me the transcript
of evidence heard from representatives of the Institute of Chartered
Accountants in Ireland, on the subject of Sir David Varney's Review
of Tax Policy in Northern Ireland, which I have read with interest.
3. Sir David Varney's report is a comprehensive
and careful analysis of the case for reducing corporation tax
in Northern Ireland. He considered representations from a wide
range of bodies including the Institute of Chartered Accountants
in Ireland. He concluded that on the basis of the costs and benefits
for Northern Ireland alone, there is no clear and unambiguous
case to cut the corporation tax rate; and on an assessment of
the costs and benefits to the UK, there is not a case for a lower
corporation tax rate in Northern Ireland.
4. However although the Government accepted
his view, the Chancellor commissioned a second review to consider
how to improve competitiveness in Northern Ireland. Sir David
Varney's second review was published in April. In the light of
further representations he considered the case for enhanced tax
credits for R and D expenditure and a tax credit for training.
He concluded that the findings of both his reports suggested that
targeted tax policies are generally inappropriate tools for delivering
region or company specific incentives, on a number of grounds
including cost, value for money, compliance, administration, tax
complexity and state aids.
5. But Sir David Varney's report did point to
both the strong performance of the Northern Ireland economy under
the peace process and the scope for further economic and public
sector reform in the future including to strengthen the role of
the private sector. The Government is committed to working with
the Northern Ireland Executive in taking this work forward to
improve economic prosperity for all the people of Northern Ireland.
Yvette Cooper MP
Chief Secretary to the Treasury
19 May 2008
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