The North is planning to replicate the Republic’s success in attracting inward investment and is seeking consultants to advise it on the key sectors where IDA Ireland has successfully used the lure of low corporation tax.

The power to set a corporation tax rate for the North is due to be devolved to the Executive in 2017. The indications are the rate will be cut to match the 12.5 per cent in the Republic. As preparations accelerate for this, two government departments in the North and Invest Northern Ireland – the counterpart to the IDA – are seeking consultants to advise them on “competing for FDI [foreign direct investment] with significantly reduced corporation tax in Northern Ireland”.

The confidential document says unpublished work carried out by the Ulster University Economic Policy Centre estimates 37,500 jobs could be created by 2033 with a 12.5 per cent corporation tax rate. The consultants will be asked to advise on which sectors would be most likely to be attracted by low corporation tax and to “quantify the number of projects within the Republic of Ireland” by sector and subsector attracted by the 12.5 per cent rate over the past five years.

The consultants are then asked to identify where Invest Northern Ireland should focus “using corporation tax as a key incentive” and to provide a list of potential key target companies. They will also be asked to benchmark how Invest Northern Ireland operates compared to other FDI promotion agencies , particularly those which use a low corporation tax rate as a key attraction. A wider study of the North’s competitiveness will be part of the work programme, including identifying key strengths to be marketed and weaknesses addressed.

Devolution powers

The document was drawn up by two of the North’s government departments – Enterprise, Trade and Investment, and Employment and Learning – and Invest Northern Ireland. Legislation was introduced in Westminster in January to allow the devolution of the power to set corporation tax, in parallel with the implementation of measures to underpin the finances of the Executive.

The legislation was passed into law in mid-March but the new powers will only be commenced if the Executive delivers on its commitment in the December 2014 Stormont Agreement to stabilise its finances, including the welfare reform. Revenue lost from cutting the tax will have to be found locally and will not be replaced via the annual grant the North gets from the British exchequer.

The North’s First Minister, DUP leader Peter Robinson, has indicated the rate may be cut to the same level as the Republic’s 12.5 per cent, to come into effect from April 2017.