Brexit has no effect on Corporation Tax

It is well known that, if Northern Ireland chooses to reduce its Corporation Tax rate, it suffers a consequent reduction in public spending to “make up” for this advantage over the rest of the UK.

Somewhat bizarrely, this internal matter for the UK and obvious issue of basic fairness has made it into the “Brexit” debate, with some Brexiteers mischievously and frankly erroneously suggesting that somehow leaving the EU would mean the reduction would no longer be necessary.

It would absolutely still be necessary.

The arrangement long pre-dates the European Union; in fact, it pre-dates the War. In 1938 the UK Chancellor, Sir John Simon, agreed to meet any shortfall in Northern Ireland’s expenditure for as long as it maintained the same level of welfare provision and main taxation. This is known as the “parity principle”, and it is under this principle that Northern Ireland would have to pay any difference in welfare provision or taxation (such as reduction of Corporation Tax) out of its own budget.

Given that Scotland and Wales now also have devolution, the importance of that parity principle is greater now than ever.

If a reduction in Corporation Tax would take £250 million from the NI budget inside the EU, it would take £250 million from it outside the EU too. It is a UK principle – something you would think Brexiteers would know about.

So let us hear no more of that particular Brexit fantasy!

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2 thoughts on “Brexit has no effect on Corporation Tax

  1. So it probably was the Brits who introduced the law into EU law and did so so that the likes of the Canaries don’t get subsidised to be tax havens.

  2. The other thing people need to realise arguably unionists more so is that if NI wants a subsidised corporation tax reduction, Scotland, Wales, maybe even the City of London would want one too which could lead to either the distability of the union on one hand or the competitive advantage nullified on the other. Nationalists would have to accept an effective parity principle on these matters would exist in Sny Irish unification.

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