I’ve just got hold of a copy of the new report on corporation tax by the Economic Research Institute of Northern Ireland. One key passage perhaps explains why the study has excited so much interest, not just in Northern Ireland, but also in Scotland.
in the UK context the relatively prosperous South East with major concentrations of companies seeks to capture tax from those moving into the region to gain access to its markets. The loss of revenue from a cut in Corporation tax would be significant. On the other hand more peripheral regions with a smaller tax base can use a strategy of lower Corporation tax to promote themselves as attractive profit centres for FDI without suffering large losses of tax from existing enterprises. This form of analysis suggests that a unified Corporation tax rate may not be optimal for different regions within the UK.
The study, Assessing the Case for a Differential Rate of Corporation Tax in Northern Ireland, is available from ERINI on request.