Written evidence from Invest Northern
Ireland
(a) How does an enterprise zone operate?
The way in which an Enterprise Zone (EZ) will operate
is dependent on the criteria used and objectives set at the time
of its establishment. However, in general terms, the creation
of an EZ would be to enable businesses locating within it to benefit
from preferential rates and other benefits. These may include
lower taxation rates, lower property costs, access to specific
infrastructure benefits etc.
An Enterprise Zone concept could therefore be used
to address a range of issues including:
- To accelerate sub regional growth
- To cluster targeted sectors
- To attract new FDI
- To support early businesses
(b) Why should Northern Ireland be declared
an enterprise zone?
Consideration is already being given to lowering
the rate of corporation tax in Northern Ireland. Notwithstanding
the outcome of such considerations, Invest NI would support NI
being given EZ status as this could facilitate the application
of a range of tax options that would stimulate the economy. These
could include tax credits (eg for TV drama production; marketing;
training; capital allowances). Recently, political parties and
commentators have pointed to the continuing differential between
the GB and NI economies in terms of Gross Value Added and also
in terms of the public / private sector split. The argument is
that a "boost" to enterprise should be given through
an approach targeted on encouraging both indigenous and Foreign
Direct Investment (FDI) through such enterprise zone - based incentives.
While there appears to be strong cross party support in the NI
Assembly for the concept of NI as an Enterprise Zone, there may
be variation in the specific understanding of what that entails.
However, if the incentives were sufficiently attractive, an EZ
with specific fiscal benefits could allow Northern Ireland to
compete effectively with other areas having a lower corporation
tax rate.
(c) What should be included in any enterprise
zone proposals?
Proposals for inclusion in an Enterprise Zone should
be those that can be used to encourage companies to either locate
in or expand in Northern Ireland, an example of which could be
tax benefits such as capital allowances. Most manufacturing FDI
into Northern Ireland comes through expansions and existing manufacturing
investors could be encouraged to take advantage of such a benefit,
particularly if all of NI was made an EZ rather than just specific
areas.
While various commentators have focused on the corporation
taxation issue there are other options which could be considered,
including:
- SMEs attracting lower taxation rates than large
companies
- Lower property costs, including rent in Enterprise
NI premises
- Specific benefits in terms of grants or tax credits
for investment in certain areas eg: R&D tax credits / training
grants etc.
- Support for specific sectors.
(d) Are these proposals aimed at any particular
sectors?
Enterprise Zones may be cross sectoral or sectoral,
depending on the key sectoral objectives of both indigenous company
development and FDI.
(e) Is there a priority as to what should
be included?
Invest NI would strongly support Northern Ireland
being made an Enterprise Zone. If this were the case, Invest NI's
focus would be on those target areas identified in its Corporate
Plan, and it would therefore be important to include options which
would encourage both the development of indigenous business and
the attraction of new inward investment. In determining which
specific tax benefits should be ascribed to the EZ, consideration
should be given to the tax benefits that would further enhance
the sectors in which NI already has an international competitive
advantage as there is little to be gained by offering tax advantages
that will only enhance sectors in which NI cannot demonstrate
a competitive business proposition.
(f) How long should the enterprise zone operate
for and what aspects might be made permanent?
Given that companies are seeking stability in tax
rates when they are assessing location options, the EZ should
be established for 10-15 years. Any shorter period provides no
certainty for companies of the proposed benefit and undermines
the very purpose of the initiative. However, given a dynamic economic
environment, "permanency" seems inappropriate without
reviews being undertaken at appropriate intervals.
(g) Which aspects would be the responsibility
of the UK Government and which would be the responsibility of
the NI Executive?
It is assumed that the UK government would agree
costs within the context of the block grant and it would then
be up to the NI Executive to decide how to allocate incentives
/ budget.
(h) What worked well, and what did not work
well, when there were enterprise zones previously in Northern
Ireland?
Previous EZs in Northern Ireland were focused on
offering advantageous property rates and largely resulted in the
development of hotels and warehousing facilities. As such, they
achieved limited success in terms of stimulating and expanding
economic development throughout Northern Ireland. Should a decision
be taken to re-establish the Enterprise Zone provision in Northern
Ireland, it would be essential to make all of NI an EZ, to ensure
that significant displacement was not an unintended consequence
of the initiative.
It would also be essential that the EZ operated strictly
within agreed policies and that robust monitoring is carried out
to ensure compliance with the established policy guidelines and
that specific objectives are being met.
(i) What lessons can we learn from enterprise
zones, or similar initiatives to try and stimulate enterprise,
in other countries?
Commentators have looked to the packages of measures
used by governments in countries such as ROI, India and Israel.
There is evidence that a coordinated, multi-layered approach which
includes a "basket" of ideas and incentives is the best
approach. For example, targeting incentives at a particular sector
and developing a skills policy to complement this, as in India's
approach to IT, or Ireland's approach to Financial Services.
21 January 2011
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