Corporation Tax (Northern Ireland) Bill — House of Commons, 2015-01-27
Topic: Macroeconomics
David Michael Gauke (Conservative, Centre-right): The important issue here—it was also a point raised by my hon. Friend the Member for Redcar—is ensuring that there is the capacity to deal with the transfer pricing issues. Transfer pricing is a highly skilled and specialised discipline within HMRC. It is important that the transfer pricing team has the capacity to deal with those matters. That is best done on a centralised basis rather than having people dispersed around the United Kingdom. The hon. Gentleman and I have had many conversations over a number of years on the issue of HMRC’s presence in Northern Ireland. Let me stress that this is a matter of ensuring that we have the right skills, that the customer relationship managers work closely with businesses and that there is a good understanding of how this differential rate will work and be applied It is worth pointing out that it will not be possible for companies to set up a brass plate to benefit from a lower rate in Northern Ireland. The rules require a permanent physical presence in Northern Ireland and, more fundamentally, a calculation of Northern Ireland’s trading profits based on the profits that the Northern Ireland activity would have made as a stand-alone entity. That separate enterprise approach coupled with the exclusion of investment profits from the Northern Ireland regime should ensure that common international tax avoidance arrangements cannot be replicated within the Northern Ireland regime. As a Government we have a proud record of progressing the international debate on the issue, and we are not going to allow an opportunity for abuse in our system On the block grant adjustment, the Stormont House agreement sets out that the block grant will be reduced to reflect the tax revenues forgone by the UK Government as a result of devolving tax powers. We will continue to work with the Northern Ireland Executive on the detailed mechanics to ensure that the Northern Ireland block grant is reduced appropriately. The reduction will depend on the rate that is set by the Northern Ireland Executive. To answer a point made by my hon. Friend the Member for Redcar, there are no particular restrictions on that. Conceivably, it could be a 0% rate, but that would have to be paid for and it would be expensive. An estimate of the cost to the Northern Ireland Executive of a 12.5% rate is in the region of £300 million by 2019-20, which is when the steady state will be in place. That will depend on a number of factors, not least the growth of the economy I am conscious of time and the fact that there is another debate to be had, but let me conclude by saying that there is a strong case for action in this area. The Northern Ireland economy is significantly more dependent on the public sector than the rest of the UK, with about 30% of workers employed there, compared with about 20% in the rest of the UK. The Northern Ireland corporation tax rate of 21% has to compete with the rate in the Republic of Ireland of 12.5%. If corporation tax is lowered in Northern Ireland, about 34,000 businesses in Northern Ireland stand to benefit, including 26,500 small and medium-sized enterprises The Northern Ireland Executive will have greater power to rebalance the economy towards a stronger private sector, boosting employment and growth. Northern Ireland will attract more investment and become more competitive, boosting the entire UK economy and the standard of living of people across Northern Ireland. The Bill is conditional on the Northern Ireland Executive continuing to work to balance Northern Ireland’s budget to ensure that people across the UK can benefit from the stronger economy and fairer society that this Government have been building. I hope that the House will give the Bill a Second Reading, and that we have the support of the whole House Question put and agreed to. Bill accordingly read a second time. Corporation Tax (Northern Ireland) Bill (Programme) Motion made, and Question put forthwith (Standing Order No. 83A(7)), That the following provisions shall apply to the Corporation Tax (Northern Ireland) Bill: Committal (1) The Bill shall be committed to a Public Bill Committee Proceedings in Public Bill Committee (2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 12 February 2015 (3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets Consideration and Third Reading (4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced (5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day. (6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading Other proceedings (7) Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed. —(Dr Thérèse Coffey.) Question agreed to. Corporation Tax (Northern Ireland) Bill (Ways and Means) Motion made, and Question put forthwith (Standing Order No. 52(1)(a)), That, for the purposes of any Act resulting from the Corporation Tax (Northern Ireland) Bill, it is expedient to authorise: (1) any increase in charges to corporation tax by virtue of a resolution made by the Northern Ireland Assembly setting the Northern Ireland rate of corporation tax, and (2) any increase in charges to corporation tax by virtue of the Act. —(Dr Thérèse Coffey.) Question agreed to.