Corporation Tax

House of Lords written question – answered on 16th December 2014.

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Photo of Lord Kilclooney Lord Kilclooney Crossbench

To ask Her Majesty’s Government whether the devolution of corporation tax is proposed for (1) Scotland, (2) Wales, and (3) Northern Ireland.

To ask Her Majesty’s Government whether they consider that the devolution of corporation tax to Scotland, Wales, or Northern Ireland would cause a reduction in the block grant under the Barnett Formula to any of those devolved administrations.

Photo of Lord Deighton Lord Deighton The Commercial Secretary to the Treasury

The Smith Commission reported on 27 November and the Government has announced it will now prepare draft legislative clauses to implement the Heads of Agreement by the end of January. The Smith Commission did not agree that corporation tax would be devolved to Scotland.

The Wales Bill, currently in Parliament, provides the legislative framework to support the implementation of the recommendations made in the first report of the Commission on Devolution in Wales (Silk Commission). The Wales Bill does not feature any devolution of corporation tax powers to Wales.

At Autumn Statement 2014, the Government announced that the devolution of a corporation tax rate-setting power to Northern Ireland could be implemented provided that the Northern Ireland Executive is able to manage the financial implications. The parties in the Northern Ireland Executive are continuing talks aimed at resolving a number of issues including agreeing budgets for 2015-16 and putting the Executive’s finances on a sustainable footing for the future.

Northern Ireland faces unique cross-border challenges from the very low corporation tax rate in the Republic, significant over-reliance on public sector employment and the challenging legacy of the Troubles. The devolution of corporation tax to Northern Ireland recognises those factors and is consistent with the UK’s asymmetrical approach to devolution.

Any devolution of tax powers, such as corporation tax rate-setting powers, would require a corresponding reduction in the block grant to reflect the tax revenues that the UK Government would forego.

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