Devolving any tax rate varying power must satisfy EU State Aid criteria. The European Court of Justice decision on the “Azores Case”, which sets out the criteria for regional differences in direct taxation:
institutional autonomy (the region must have political and administrative status separate to central govt)
procedural autonomy (decision to vary tax rate must be taken without central government intervention) and
fiscal autonomy (the region must bear the full fiscal consequences of changes in tax revenues)
In order to meet the fiscal autonomy condition, Northern Ireland’s block grant would need to be adjusted to reflect the fiscal costs of a reduction in the rate of corporation tax .
Consultation will run from 24 March until 24 June.
Following consultation, if the Government decides to pursue the policy further, the complexities associated with devolving a separate rate of corporation tax to the Northern Ireland Assembly mean this would take several years to implement.