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<p>The Smith Commission reported on 27 November and the Government has announced it
will now prepare draft legislative clauses to implement the Heads of Agreement by
the end of January. The Smith Commission did not agree that corporation tax would
be devolved to Scotland.</p><p> </p><p> </p><p> </p><p>The Wales Bill, currently in
Parliament, provides the legislative framework to support the implementation of the
recommendations made in the first report of the Commission on Devolution in Wales
(Silk Commission). The Wales Bill does not feature any devolution of corporation tax
powers to Wales.</p><p> </p><p> </p><p> </p><p>At Autumn Statement 2014, the Government
announced that the devolution of a corporation tax rate-setting power to Northern
Ireland could be implemented provided that the Northern Ireland Executive is able
to manage the financial implications. The parties in the Northern Ireland Executive
are continuing talks aimed at resolving a number of issues including agreeing budgets
for 2015-16 and putting the Executive’s finances on a sustainable footing for the
future.</p><p> </p><p> </p><p> </p><p>Northern Ireland faces unique cross-border challenges
from the very low corporation tax rate in the Republic, significant over-reliance
on public sector employment and the challenging legacy of the Troubles. The devolution
of corporation tax to Northern Ireland recognises those factors and is consistent
with the UK’s asymmetrical approach to devolution.</p><p> </p><p> </p><p> </p><p>Any
devolution of tax powers, such as corporation tax rate-setting powers, would require
a corresponding reduction in the block grant to reflect the tax revenues that the
UK Government would forego.</p><p> </p>
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