NI devolution of tax powers condoc responses

The Northern Ireland Assembly Department of Finance (DoF) has published 'Consultation Response Report - Devolution of more fiscal powers', this considers stakeholders' views, including the public's responses on the recommendations made by the Independent Fiscal Commission in 2022.

Background

• On 12 March 2021, the Northern Ireland Finance Minister, Conor Murphy, announced the establishment of the Independent Fiscal Commission. The Commission was established to carry out a comprehensive review of the case for increasing fiscal powers available to the Assembly.
• The Commission’s Final report was published on 19 May 2022 and made a total of 23 recommendations which provide a comprehensive framework for delivering enhanced fiscal powers.

The DoFin considering the Commission’s report, set out a Consultation on the devolution of more fiscal powers in order to seek formal stakeholder engagement on the recommendations made by the Commission, via this public consultation. Following the responses (as summarised below) the DoF will now be considering policy considerations and next steps that can be presented by an incoming Finance Minister to the Executive, it has noted that,

"This will likely be a long-term journey as it has been in Scotland and Wales.  Further fiscal devolution could undoubtedly have a meaningful impact for all citizens here and the Department intends to maintain engagement with stakeholders, both through this consultation, and as this work progresses."

Summary of Responses

Responses ended on 29 November 2022 and followed two engagement sessions on 24 and 25 October 2022 which fourteen organisations attended and provided their views. Written and online submissions generated 59 responses in total, 25 from a range of business organisations, political parties, academics or community/voluntary organisations and 34 responses from anonymous individuals.

The only political parties to offer responses were Alliance and Sinn Féin.

The responses answered six questions.

Question 1: Do you think the Executive should be provided with more fiscal powers like the Scottish and Welsh administrations have? What are your reasons for saying that?

Responses to this question were mixed, with strong opinions both for and against further fiscal devolution being put forward, as well as a significant number who were unsure if being provided with further fiscal powers would be of benefit to an Executive. Around 80% of anonymous individuals were against further fiscal devolution, whereas amongst representative groups, support was much stronger with over 85% being broadly open to further fiscal devolution of some degree.

• For: A number of responses were clear that their support for fiscal devolution was contingent on it being grounded in a well-thought-out strategy and with a gradual approach to minimise risk whilst increasing capacity.
• Against: The most common reason for arguing against additional fiscal devolution was due to the strong dissatisfaction with the Executive’s record of instability and difficulty in delivering for the electorate. There were high levels of distrust regarding the ability of the Executive to be able to effectively manage any new fiscal powers in these responses; where they cited concerns around the competency and capacity of local political institutions to administer an enhanced suite of fiscal powers.

Question 2: Which taxes that the Commission recommends for devolution do you think that the Executive should seek to prioritise? Why do you say that?

• Corporation Tax: Corporation Tax was the most frequently mentioned fiscal power suitable for devolution by respondents, with the belief that devolving this tax would help to boost the competitiveness of Northern Ireland’s economy, especially when compared to the Republic of Ireland.
• Income Tax: Respondents were split on whether or not they supported the devolution of Income Tax at present. One response contended that behavioural effects should always be given careful consideration based on the experiences in Scotland and Wales, especially when devolving such a key tax power.
• VAT: Although not recommended for devolution at this time by the Fiscal Commission, a number of respondents also mentioned VAT as a potential candidate for further fiscal devolution, believing it offered the potential to stimulate economic growth whilst influencing societal behaviour.
• Other Taxes: Other taxes mentioned included the Air Passenger Duty (APD), with the majority in support of full devolution beyond long-haul APD which has already taken place. APD was viewed as being crucial to supporting the Northern Ireland economy, particularly in the North-West.
  • There was limited discussion of Stamp Duty Land Tax (SDLT) as a possible candidate for devolution. Respondents who mentioned the tax were generally in agreement with the Commission’s report that SDLT should be fully devolved to the Executive.

Question 3: What are your views regarding the timing for devolution of the taxes as recommended by the Commission?

• Most respondents believed that it was unrealistic to suggest that further fiscal devolution would be completed in the short to medium term. Even those in favour of further fiscal devolution said that the Executive would need to demonstrate an extended period of stability. Almost no respondents were in favour of starting the process until the Executive is restored and can demonstrate its stability.

Question 4: What are your views as to how the Executive could best make use of any additional fiscal powers? Should the Executive be seeking such powers to raise or lower certain taxes? Where might the Executive use taxes as policy levers to change behaviours? And do you think increased local taxation should be used to better fund public services in line with local needs and circumstances?

• Responses focused almost solely on new powers being used to reduce tax rates in Northern Ireland, should further fiscal powers be devolved.
• Open and transparent decision-making was seen by a number of respondents as an essential characteristic of further fiscal devolution in Northern Ireland and the Executive should have a clear plan for tax and spending plans which accurately reflects the local context and priorities.
• APD and the Apprenticeship levy were also seen by some as key taxes via which businesses could be more strongly supported.
• It was also generally agreed that improved statistics, intelligence and data were essential to the successful operation of any new tax powers.
• A number of responses suggested that any additional funds raised from fiscal powers should be used to improve public services and deal with the public service deficits which currently exist in health and education.

Question 5: What are your views on how any newly devolved fiscal powers might be administered?

• Responses in favour of further fiscal devolution were generally supportive of the creation of a local revenue authority to administer any newly devolved taxes in Northern Ireland, but in many cases caveated this with the suggestion that administration of taxes should be considered on a case-by-case basis.
• Responses noted that if Income Tax was to be devolved, it may be preferable to have it administered by HMRC.

Question 6: Are there any other issues related to fiscal devolution, perhaps not covered in the Commission’s Final Report or where you have a different opinion, which in your view should be considered by the Executive?

• The report says the responses to this question were better related to the previous questions in the consultation and listed single submissions that looked at issues such as alcohol duties, Crown Estate revenues in Northern Ireland, the Barnett Formula and tax relief on mortgage interest payments.

Useful guides on this topic

Consultation: More fiscal powers for Northern Ireland
The Northern Ireland Assembly Department of Finance has published ‘Consultation on devolution of more fiscal powers’. This considers recommendations made by the Independent Fiscal Commission in May 2022.

Northern Ireland Income Tax
What is the rate of Income Tax for Northern Ireland? What rate is Northern Irish Tax? 

Northern Ireland Corporation Tax
What is the rate of Corporation Tax in Northern Ireland?

External links

Consultation Response Report - Devolution of more fiscal powers

Consultation on devolution of more fiscal powers