ICAI REJECT VARNEY REPORT

...VARNEY REPORT MISSES UNIQUE OPPORTUNITY TO TRANSFORM NORTHERN ECONOMY...

The Institute of Chartered Accountants in Ireland (ICAI) has expressed disappointment in the Varney Review published today stating that it misses an historic opportunity to transform the Northern Ireland economy. ICAI strongly believes that the arguments outlined in the report need to be tested further.

ICAI is now calling on the Northern Ireland Affairs Select Committee at Westminster to launch an inquiry to question the conclusions. As a non devolved matter, over which the Northern Ireland Assembly has no control, the ICAI has to take these concerns to Parliament.

The key opportunity missed is the reduction in the headline rate of Corporation Tax to 12.5%. Above all else, this is required to set the Northern Ireland economy on a sound footing by supporting indigenous industry and attracting Foreign Direct Investment, as the economy emerges from the era of under investment and over reliance on the public sector.

The ICAI points out that:

The report seems to operate on the premise that there is no case for differential tax policies in Northern Ireland, and indeed concludes in this way. Nevertheless, a second review is now promised which is to look at incentives for supporting the sustainable growth of businesses, investment and employment in Northern Ireland.

The overwhelming focus of the report on rejecting arguments for a 12.5 rate of Corporation Tax for Northern Ireland is inconsistent with the reference framework for the report in the first instance, which was to examine how current and future tax policy, including the tax changes announced in the Budget 2007, can support the sustainable growth of businesses and long-term investment in Northern Ireland.

What is really needed is a coherent policy to influence earning patterns – the generation of profits by businesses in Northern Ireland. Surely this could have been achieved in Sir David's initial review, without the requirement to promise a second study.

Mr Vincent Sheridan, President of the ICAI expressed disappointment at the content of the report stating:

‘In terms of Foreign Direct Investment (FDI) we will miss the one and only opportunity to attract business to Northern Ireland through a globally competitive corporation tax rate.

This is a once in a lifetime opportunity to boost to the Northern Ireland economy and play a historic role in bedding down peace in the region by reducing the rate of corporation tax, bringing it into line with that of the Republic of Ireland”.

Mr Eamonn Donaghy, Chairman of the ICAI NI Tax Committee commented:

“We have been single minded in advocating a reduced rate because we know it works The repeated delays, and ultimate timing, of the issue of Sir David's report reflect its underlying weakness as a profoundly negative report.

“When compared to the 12.5% rate of Corporation Tax in the Republic of Ireland, the current 30% tax rate in the North is way off the pace.”

A recent survey of almost 500 Chartered Accountants in business, industry and the public sector in Northern Ireland has provided overwhelming support for a cut in corporation tax.

The Financial Confidence survey, undertaken by the Ulster Society of Chartered Accountants (USCA) in association with the Economic Research Institute of Northern Ireland (ERINI), highlights that a cut in corporation tax is viewed by its members as the key fiscal measure needed to assist private sector growth in Northern Ireland.

In anticipation of the Varney Review report the ICAI has gained the support from the Northern Ireland members of the NI Affairs Select Committee at Westminster. Since August 2007 the ICAI has met with the following Members of Parliament:

• Stephen Pound MP – Deputy Chairman of the NI Affairs Select Committee
• John Grogan MP, Lab, Selby
• Sammy Wilson MP, DUP, East Antrim
• Lady Sylvia Hermon MP, UUP, North Down
• Alasdair McDonnell MP, SDLP, South Belfast
• Gregory Campbell MP, DUP, East Londonderry