Corporation Tax in Northern Ireland - Northern Ireland Affairs Committee Contents

Written evidence from the Northern Ireland Independent Retail Trade Association

The Northern Ireland Independent Retail Trade Association is the representative body for the independent retail sector in Northern Ireland.

Although the Association was only formed in Spring 2000 it already represents the interests of over 1,250 independent retail members throughout the Province. Our collective membership employs more than 30,000 staff and has an annual turnover of over £3 billion to the Northern Ireland economy.

NIIRTA membership includes wholesalers, independent retailers of all kinds, suppliers to the sector and affiliated traders groups.

Our member stores are generally owned and managed by local families rather than large multi-national companies with shareholders. These member stores are absolutely vital in providing local employment as well as a strong focal point within the local community.

We very much welcome the opportunity to submit evidence on this subject.

Northern Ireland is a small business economy—with 98% of all businesses classified as "small". The independent retail sector is the biggest sub-sector of that economy and plays a crucial role as the backbone of the private sector.

A number of recent decisions have encouraged NIIRTA to believe that the Northern Ireland Executive has recognised the value of the independent retail sector to the local economy.

This economy faces unprecedented challenges in the years ahead, and it is important that all sectors and levels of government consider all the options open to them. Corporation Tax rates is a critical area for consideration.

NIIRTA is also a socially responsible organisation who through its members, strives for a sustainable future in terms of social, ethical and environmental factors.


The Northern Ireland Independent Retail Trade Association strongly supports the proposal to reduce corporation tax rates for Northern Ireland

The independent retail sector will principally benefit from any reduction as the wider economy flourishes and increases its competitiveness, especially in respect to the Republic of Ireland, and attracting much more significant levels of Foreign Direct Investment.

When the Economic Reform Group launched its report, The Case for a Reduced Rate of Corporation Tax in Northern Ireland,[1] NIIRTA Chief Executive, Glyn Roberts commented:

"This is a very well researched and professional report which should be required reading for all of our MLAs and MPs if they want to see a major step change in the Northern Ireland Economy."

"There is no doubt that more FDI for Northern Ireland as a result of a lower Corporation Tax rate would be a win-win for both creating new jobs and the knock on effect this would have for our indigenous small businesses."

"More large companies coming to Northern Ireland and therefore more people spending would be clearly beneficial for local retailers and suppliers."

"The Economic Reform Group has also kick-started an important debate about what future fiscal powers our Assembly should have to ensure it plays a bigger role in making our local economy fit for purpose."[2]

There have been many reports and surveys on this issue in recent years. NIIRTA now firmly believes that the time for action has arrived. Business owners are becoming frustrated at a lack of tangible action, which needs to be addressed as a priority by both the devolved and national governments.

The current fiscal instability should be viewed as an opportunity to take the radical decisions which will refocus and grow the local economy.

Is a reduction in corporation tax the simplest and quickest way to make the NI economy more competitive and how long would it be before Northern Ireland realised the benefits?, What alternative measures could be introduced by the UK Government to make the NI economy more competitive? and what are the implications for Northern Ireland?

No-one should make the mistake of thinking if a reduction in Corporation Tax were to be implemented all Northern Ireland's economic difficulties would be solved; there are EU states with lower rates, and there are other considerations such as quality of infrastructure, skills base, access to markets etc to be taken into consideration.

Northern Ireland scores well in these areas but there is room for significant improvement. There is not a huge difference when comparsions are made to the Republic of Ireland, therefore a reduction in Corporation Tax could rapidly level the playing field with the Republic and should fairly quickly enable Invest NI to be much stronger in negotiating with those multi-nationals who are clearly expressing a preference for the Republic of Ireland at this time.

Despite its troubles the Republic of Ireland is demonstrating that its continued low rate of corporation tax is still a popular measure for encouraging a new generation of foreign investment. Even a cursory look at recent IDA press releases[3] indicates the level of ongoing FDI activity, principally from American multi-nationals, is increasing.

The challenge will be government's ability to deliver the resources required to improve (or indeed, maintain), Northern Ireland's competitive position in light of the predicted deep cuts in public expenditure.

There have already been significant steps to improve local competitiveness. Initiatives such as MATRIX, Town Centre regeneration master plans, the restructuring of Invest NI and high levels of infrastructure spending are rapidly improving the "Northern Ireland product", from those independent retailers focused on the domestic market (including servicing the growth in the tourist sector) to the export-driven, technology-led businesses. All have a part to play in building the local economy.

Many of the decisions to improve the local economy are in the hands of the devolved Assembly, and NIIRTA believes that there is an opportunity to consider an imaginative partnership with the Republic of Ireland, building on existing cross-border economic development initiatives, and encouraging greater co-ordination in corporation tax policy, amongst other strategic tools.

With the ever improving political situation, and close partnerships emerging such as the all-island Single Energy Market and tourism partnerships, there is greater scope than ever to create economic structures which can benefit both sides of the border whilst retaining their separate sovereign statuses.

What effect will the reduction in the corporation tax rate on a UK wide basis announced in the June 2010 Budget have on the competiveness of the Northern Ireland economy?

While the declaration that Corporation Tax is to be reduced over the next four years will be welcomed by all businesses in the UK, the fact is that even after the four years of reduction, the Corporation Tax rate will be around 6% higher than the Republic—a position that is simply not sustainable from a Northern Ireland perspective, and therefore any government proposal which fails to address this point will have little or no impact.

What would be the effect of reduced tax revenue in Northern Ireland?

Business confidence has proved to be resolutely low, and it is becoming clear that radical stimulus measures are going to be required to sustain economic growth. The requirement for Northern Ireland to initially forfeit a significant budgetary figure as part of a Corporation Tax reduction is a challenge which will require detailed consideration. Already faced with receiving a lower block grant allocation, a further reduction through corporation tax concessions will mean further pain in the short term. The inevitable reduction in government services will hurt all stakeholders, however, NIIRTA believes that if the local economy is to be rebalanced effectively then such hard decisions must be taken and it is advantageous to take them now so as to allow the private sector to "get on with the job" of moving forward.

Laying the foundations for a better tomorrow needs to take into account the consequences for the present day and those businesses trading in the current environment. The independent retail sector, already facing many pressures, finds the marketplace already extremely challenging—a further erosion of short-and-medium term spending power could prove hugely damaging, perhaps terminally. Therefore a reduction in the rate should be accompanied by measures to protect short term economy stability; such measures must be agreed on the basis of interdepartmental co-operation within the Northern Ireland Executive.

European Union Rules—The Implications

NIIRTA welcomed the clarity that determined that EU rules permit a reduction of corporation tax in a region within a member state (ie Northern Ireland within the context of the United Kingdom). Given that the "region" must have "political and administrative authority to introduce its own tax regime"[4] this is a quite a step forward for the Northern Ireland Assembly and all those represented in it must ensure that it is underpinned by stability and long-term thinking to make this a viable option.

The Implications for the Independent Retail Sector

The independent retail sector will be a key player in any economic redevelopment plan for Northern Ireland, and will benefit greatly as a consequence of the increased wealth generated from the provision of high value jobs and miscellaneous work filtering down from larger organisations. Therefore it is fair to say that the initial tool of a lowering of corporation tax will have a significant "ripple effect" throughout the district economies where inward investors can be attracted to. Such large organisations are often generous patrons of local projects and community based activities, and the positive sense of economic activity provides a stimulus in itself to town and city centre planning. There is a real concern of a lack of funding being forthcoming from Government in the years ahead (despite a significant number of master plans being released recently by the Department for Social Development) and therefore the attraction of large businesses can compensate to a degree, and act as a driver in their own right.

What would be the benefits of equalizing the corporation tax rate in Northern Ireland with that of the Republic of Ireland? & what evidence is there from other countries that having different corporation tax rates on a regional basis is effective?

The benefits of equalizing the corporation tax rate is clear when one considers the remarkable achievement of the Republic of Ireland, which despite the current downturn, continues to house a strong, export-oriented business sector.

How the Irish government transformed the country's tax system and as a result turned Ireland into one of the world's best performing economies, is well known. It is fair to assume that a significant amount of the investment that has located in the Republic of Ireland could have been located north of the border if conditions had been more favourable.

A major contributor to Ireland's export performance in both manufacturing and services has been its success in becoming host location to multinational companies in key high value-added sectors like pharmaceuticals, medical devices and ICT. As the Republic's Government acknowledges, Ireland's very competitive corporation tax regime played a crucial role in attracting such investors and it has made clear that, notwithstanding the current pressure on the public finances, this competitive advantage will be maintained.


There has been much written of the economic challenge ahead. However, it is also an opportunity for business and the public sector to work within a new tax and spending framework, and through necessity, take forward new innovative approaches to doing business and operate with new levels of efficiency.

NIIRTA supports the reduction in corporation tax to bring Northern Ireland into line with the Republic of Ireland—with appropriate measures to assist and protect as far as possible existing business sectors, who may suffer consequences in funding shortfalls as a result of initial lower budget allocations. The experience of the Republic of Ireland has demonstrated that low levels of corporation tax can act as a significant driver in generating significant levels of FDI and thus support a prospering indigenous sector, through growth in employee wage levels etc. However, not everything has been perfect and Northern Ireland can learn from mistakes made, such as consider carefully the geographical locating of FDI projects to maximise spread and create a genuine provide wide economic strength.

Many indigenous businesses, large and small, including many NIIRTA members—will gain both directly and indirectly from a more competitive rate of corporation tax. This would position Northern Ireland better as a cost effective place to do business, thus attracting major international investors.

A better commercial environment benefits all businesses—and the independent retail sector will grow significantly aided by growth in the wider economic picture.

There is a unique opportunity for radical action to rebalance and grow the Northern Ireland economy, principally through private sector growth and innovation. However, politicians must show the same enthusiasm for economic development and fiscal planning as they do in creating the current structures for political development.

They must also show the will to communicate and "sell" hard and unpopular messages to the electorate. There will inevitably be short term cost implications for longer term economic benefit, but there is no alternative to radical thought and the time to take the leap is now.

6 September 2010

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2   NIIRTA Press Release-NIIRTA Welcome ERG Report on Corporation Tax, 16 February  Back

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Prepared 9 June 2011