Companies in Northern Ireland would be exempt from corporation tax on the first 60 per cent of profits under a private-sector plan meant to stimulate the North's economy, which will be put to the British government tomorrow.

The paper is published by the Economic Research Institute, a local think-tank, and backed by Sir George Quigley, former chairman of Ulster Bank and head of the Northern Ireland civil service. It represents the most detailed case yet made for special tax treatment for the North.

Under the proposal, after the zero-rated first 60 per cent of profits, the remainder would incur tax at the prevailing UK rate of 30 per cent. This would mean businesses based in the province would have a rate of 12 per cent, in effect, just less than that in the Republic.

The issue has become embroiled in the political negotiations on the restoration of the Assembly and power-sharing.

Both the DUP and Sinn Féin are calling for lower tax rates. Ian Paisley jnr says that without a tax deal, the DUP will not agree to go into government with Sinn Féin by the deadline at the end of next week.

Businesses in the North currently pay 30 per cent, the rate throughout the UK. But local businesses say a cut would stimulate foreign investment and allow them to compete with the South, where the rate is 12.5 per cent.

Gordon Brown met political parties last week and outlined various economic measures that would be available to the North if self-government was restored. But he refused to give a commitment on corporate tax.

Economists say such a regime would let UK-based multinationals move headquarters to Belfast and reduce the tax they pay.