The prospect of a cut in business tax rates in Northern Ireland is generating significant interest in the United States, the Secretary of State has said after meeting Congressmen in Washington.
Theresa Villiers said the potential for a much lower rate of corporation tax in the region than in other parts of the G7 group of nations could provide a “powerful incentive” for US executives looking for opportunities, noting that many already had a strong affinity with the island of Ireland due to ancestral ties.
Ms Villiers is in the middle of a three-day visit to Washington and New York to brief the Obama administration, Congress, business leaders and representatives from the Irish American community on the out-workings of the Stormont House political deal that was struck between the five Stormont Executive parties and the British and Irish governments in December.
The accord resolved destabilising wrangles over Northern Ireland’s budget and its non-implementation of welfare reforms while establishing new structures to deal with the legacy of unsolved Troubles killings.
Budget stability was a pre-requisite of Chancellor George Osborne giving the green light to transfer the long-sought responsibility for setting corporation tax rates to the Executive and legislation is now passing through Parliament with the goal of devolving the powers by May.
The Government’s rationale for transferring the power was that Northern Ireland shares a land border, and therefore is in direct competition, with the Republic of Ireland, where the tax on business profits is 12.5% compared to the UK rate of 21%.
Mr Villiers said the congressional delegation she had met were very interested in the opportunities presented by a potential 12.5% rate in Northern Ireland.
“They were really interested in the potential for additional economic growth that that would involve,” she said.
“That was one of the things they were most interested in.
“They found it striking there was consensus across the five parties for something like that, and for potentially what is a pretty radical move to come down to 12.5%.
“There is still an interest and commitment here in using the US’s huge economy to try to be part of building prosperity in Northern Ireland and, through that means, underpin and support stability as well.”
A commercial delegation of business figures is due to visit Northern Ireland later this year to assess potential investment opportunities.
A congressional delegation is also expected to make the trip across the Atlantic, with US envoy to Northern Ireland former senator Gary Hart planning to return as well.
“So there are potentially three visits coming up to demonstrate US support and interest in Northern Ireland,” Ms Villiers said.
As well as meeting US deputy secretary of state Antony Blinken, the Conservative MP also has an engagement with members of the Atlantic Partnership in Washington - a group of influential opinion formers.
In New York on Friday she will meet potential business investors.
The practical requirements of adjusting the taxation system will mean the earliest the Executive can introduce a new rate is April 2017.
And while all the Executive parties supported devolution of the powers, they have not yet definitively agreed how they will use it or what rate they will set in two years’ time.
Opponents of a 12.5% cut point out that Northern Ireland will lose around £300 million of public money from the Treasury annually to balance the loss to the tax coffers.
Ms Villiers acknowledged there was not yet certainty on whether rates would be cut and said the Executive would likely have to make its intention clear by May 2016 when it set the budget for the next Assembly term.
She added: “But there is a very serious possibility that corporate taxes will be lower for trading profits in Northern Ireland than they are in many other parts of the G7 and I am sure the Executive will want to start to go out and sell that as a prospect around the world for investors, not least here in the United States and I think companies will start planning on that basis.”
The Northern Ireland Secretary said a lower tax rate would add to a “whole combination of reasons” why businesses may want to set up in the region .
“It has a high quality infrastructure, a highly skilled workforce, its quality of life - and low rates of company taxes could provide another powerful incentive for US companies to come and invest,” she said.
“And there are also matters relating to heritage.
“So you will have perhaps an interest in investment in Northern Ireland partly reflecting people’s own heritage in relation to the island of Ireland.
“So there are a whole combination of factors behind the positive decision to come and invest in Northern Ireland.
“Of course the risks are if we were stuck in the place we were prior to Christmas (before the agreement was reached), with all the legacy issues causing increasing tension and the devolved institutions themselves finding it more and more difficult to operate effectively because of the budget difficulties, that kind of political instability is always risky in terms of inward investors.
“If we had seen the really gloomy scenario of people walking out of the Executive, (snap) Assembly elections - any sign of political instability is always something investors will take into account.
“It is more or less the first criteria that they look at to decide whether a place is potentially one in which they can invest.
“So I think the progress made in the Stormont House Agreement is important from that economic perspective.”