Business Opinion: It's hard to believe that the St Andrews Agreement will stand or fall on the issue of corporation tax. But the clear message coming last week - from informed Democratic Unionist Party sources - is that a refusal by the British government to let Northern Ireland match the 12.5 per cent rate that applies in the Republic could yet be a deal breaker.

The rationale is simple enough. The North's economy is in trouble. It is dependent on massive annual transfers from London, which prop up a bloated state sector in which the majority of the workforce are employed. Add to this under-investment in infrastructure and low levels of foreign investment and you can begin to see the scale of the problem.

No politician in his right mind would accept responsibility for sorting out such a situation unless they felt they had at least a fighting chance of tackling the problem. And the consensus amongst the North's politicians and its business class is that the introduction of a corporation tax rate in line with the Republic's is the best chance they have of kickstarting the economy and meeting the challenge.

The British government's position is equally simple. They argue that the idea is a non-starter, both on the basis of EU law and domestic political considerations. The treasury is of the view that Europe will not wear a lower rate of tax for the North as long as London controls the purse strings. Equally problematic is the precedent it would set. The ink would hardly be dry on the deal before the less-well-off parts of Britain would be arguing, with some justification, for a similar concession.

The North's business lobby has well-rehearsed counter-arguments to all of chancellor Brown's objections. For example, they claim a precedent has been set for such special tax treatment by Portugal in respect of the Azores.

They argue that if the political will exists, the treasury has the wherewithal to substantially negate the corporation tax advantage currently enjoyed by the Republic over Northern Ireland. And they also know that acceding to their demands is not without attractions both to the chancellor, who - given his ambition to be prime minister - may wish to cast himself as the man who sealed the deal struck by Tony Blair. Equally, Blair himself may push it through in order to ensure that this aspect of his political legacy is a positive one.

How it will all pan out is hard to predict, but it is clear that pressure is building among the political players to make corporation tax cuts a part of any deal that is arrived at.

But before they go down this road, they might want to stop and ask themselves if lower corporation tax really can be the panacea that they hope it will be. The Republic's competitiveness advantage over Northern Ireland and arguably over much of the rest of Europe is far more complex than having a low rate of corporation tax.

It stems from what lies behind the tax rate, not least a whole raft of related laws that allow multinationals to make the best use of the rate. Part and parcel of this is the very tight relationship between the Government, Dublin's top tax lawyers, the IDA and foreign companies themselves.

This facilitates the ongoing tweaking of the Republic's tax code to keep pace with the sort of sophisticated global tax planning undertaken by multinationals. The results have been impressive, particularly in recent years, with big names such as Google and Ebay attracted to the Republic, where they can knock millions off their global tax bills by virtue of complicated schemes.

Mirroring this arrangement in Belfast will not be possible overnight and it could be argued is not really possible at all without devolving far more fiscal and other powers to the Northern Assembly.

Northern Ireland's business leaders are of course well aware of this and have somewhat more modest goals. They argue, correctly, that an effective lower rate of corporation tax will allow the North to leverage its other strengths, such as broadband coverage, where it has a clear advantage over the Republic.

It is indisputable that a lower rate of corporation tax would stimulate inward investment and wider economic development in Northern Ireland. But the case has not been convincingly made that it is the missing piece in the otherwise complete Northern economic jigsaw.

The idea that a deal that might be so close should be put in jeopardy if the British government does not give way on the issue seems reckless in the extreme.