Supplementary written evidence from Eamonn
Donaghy, NIERG
The EU legislation is the EU Treaty and specifically
TITLE VI COMMON RULES ON COMPETITION, TAXATION AND APPROXIMATION
OF LAWS CHAPTER 1 RULES ON COMPETITION (SECTION 1RULES APPLYING
TO UNDERTAKINGS and SECTION 2 AIDS GRANTED BY STATES). In effect,
it would not be permissible to reduce the corporate tax rate for
one industry or commercial sector and not for all other sectors
as this could be deemed to be a state aid for that sector. Thus
the tax rate would have to be reduced for all sectors of industry.
In relation to the distinction between trading and non trading
profits, this is based on the fact that UK tax law already distinguishes
between profits from trading activities (ie buying and selling
goods or services) and profits from non trading activities (ie
receipt of interest or receipt of rents). Indeed in Ireland, a
company's profits from trading activities are taxed at 12.5% but
its non trading profits are taxed at 25%. The objective of taxing
trading profits at 12.5% is that trading companies tend to employ
people whereas non trading companies do not tend to employ people.
Thus lower taxes for trading companies should encourage employment
growth.
3 November 2010
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