The UK is set to dramatically slash corporation tax rates to woo businesses deterred by Brexit, placing it in direct competition with Ireland for vital foreign direct investment.
British Chancellor George Osborne outlined plans to aggressively cut its corporate tax to less than 15pc as he unveiled his plan to galvanise the economy.
This would take Britain close to the 12.5pc corporation tax rate in Ireland, which has been a cornerstone of our economy and helped attract major employers, including Apple, Pfizer and Google.
Business group Ibec said Mr Osborne’s stance reinforced the need for significant reform in the upcoming Budget, to make us more attractive to foreign investment.
Meanwhile, Taoiseach Enda Kenny will today propose the creation of an all-island forum to deal with the fallout from British voters’ decision to leave the European Union.
But the attitude of DUP leader Arlene Foster and her colleagues will be crucial to this plan.
The Government and IDA were already under huge pressure to ensure Ireland can reap the benefits of Brexit, with the British economy reeling from the referendum result of 10 days ago.
But now that challenge grows ever larger. Mr Osborne is intent on giving the UK the lowest corporation tax rate of any major economy, announcing a target of less than 15pc in an interview with the ‘Financial Times’.
Mr Osborne said Britain should “get on with it” to prove the country was still “open for business”.
He will also lead a delegation to China later this year to court fresh inward investment for the UK.
Business group Ibec said this reinforces the need for significant reform in the coming Budget to make us more attractive for foreign investment.
A Government spokesman said it would “always promote our competitive and transparent tax rate.”
Minister of State for EU Affairs Dara Murphy, said that the whole post-Brexit situation posed huge challenges. But Ireland still retained advantages with a dynamic, educated, English-speaking workforce.
Mr Murphy stressed that Ireland was a permanent EU member state, with the euro and full single market access. And the IDA added that our tax regime was “one part of Ireland’s offering, which also includes the ease of doing business, access to talent, and access to the European market”.
Fianna Fáil Finance Spokesman Michael McGrath warned there must be “no knee-jerk reactions” to the British finance minister’s announcement.
“There is a sense of panic in Britain in the wake of the referendum result and this decision is a measure of the grave difficulties they face post-Brexit. But there must be no panic here, no knee-jerk reactions and we must stay with our 12.5pc rate.”
Mr McGrath said “it was a throw of the dice which may or may not happen”.
He said it was a further challenge to the IDA and other State agencies to keep selling Ireland.
The developments follow hot on the heels of dramatic cuts to UK taxes announced in March, already threatening Irish efforts to retain and attract international investment.
And while Mr Osborne had previously indicated that he would slash the corporation tax from 20pc to 17pc by 2020, this goes much further.
The UK has radically closed the tax gap in recent years. In 2008, the UK corporation tax was 30pc, and now it looks set to become half that rate.
Ibec CEO Danny McCoy said: “Ibec has long highlighted the competitive threat from the UK’s increasingly pro-business tax regime. New plans to cut the UK’s corporation tax rate is a further wake-up call that cannot be ignored.”
A Dublin Chamber of Commerce spokesman said: “If we don’t react, we’re becoming less and less attractive. With the fall in Sterling aiding UK exporters versus Irish ones, it’s a crucial time and the Government has to act.”
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