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Independent Fiscal Commission recommends new fiscal powers for Northern Ireland

May 23, 2022

Last week, the Independent Fiscal Commission for NI launched its final report “More Fiscal Devolution for Northern Ireland?”. The report sets out 23 recommendations aimed at providing a comprehensive framework for implementing enhanced fiscal devolution for Northern Ireland. A key recommendation is that partial devolution of income tax should be sought under which the NI Assembly would have a degree of control over the rates, and potentially bands of income tax, but where administration would continue to be carried out by HMRC.

The Commission was established in March last year by then Finance Minister, Conor Murphy, and had been tasked with examining the case for increasing the fiscal powers of the NI Assembly, and making recommendations on powers which could enhance the NI Assembly’s fiscal responsibilities.

The Commission’s interim report published in December 2021 referred to the benefits of a lower rate of corporation tax for the region while also recognising the risks, complexities and constructive engagement required from the NI Executive and HM Treasury. Chartered Accountants Ireland continues to pursue the issue of corporation tax devolution for Northern Ireland on foot of the results of our fiscal devolution survey last September which showed that two in every three were in favour of a lower corporation tax rate.

In its final report, the Commission once again reiterates there is value in the NI Executive completing the devolution of corporation tax and sets out again the key issues which should be resolved before this can happen.

In the area of excise taxes, the report states that given the existence of the land border with the Republic of Ireland and the relevance of these taxes to devolved health and transport policies,  there would be value in the NI Executive seeking devolution of excise duties for fuel, alcohol and tobacco, but over the longer term. Complex administration and compliance issues were identified by the Commission and further detailed work is required to determine exactly how devolution of excise duties could be operationalised and the relevant costs involved.

The Commission also found that there is no technical barrier to devolution of a number of other taxes over the longer term, but if Northern Ireland is to move towards more tax devolution this should start with no more than one major tax, income tax, and some smaller taxes, and progress from there.

The Commission also recognises that although the final report has been launched at a time when no Executive or Assembly is in place in Northern Ireland, tax devolution is not something which will happen overnight. Rather, it will require time to consider, build consensus and careful planning. The Commission is hopeful that all the political parties in Northern Ireland will take the opportunity to consider the report in the future.

 

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