The British government's plans to raise Corporation Tax from 19% to 25% could cause significant difficulties for Northern Ireland’s power-sharing administration.

In the House of Commons this afternoon Chancellor Rishi Sunak gave notice in his budget speech of his plans to have the UK's Corporation Tax rate set at 25% by 2023

The large hike in the tax rate on profits made by business is to help pay for the huge sums borrowed to deal with the Covid-19 pandemic.

But the new strategy will cause a major challenge for the Stormont Executive. 

For several years it has been making the case for Northern Ireland to be allowed bring its Corporation Tax rate closer to the 12.5% regime that applies in the Republic of Ireland.

In the past the strategy of pushing for alignment with the rate south of the border has enjoyed cross-party support at Stormont.

But now the British Chancellor has announced plans to raise the UK rate to double that of the Republic of Ireland’s level.

Unionist parties may have to decide if they wish to have Northern Ireland rates no different than the proposed 25% British system or if Corporation Tax is one area where, for competitive reasons, Northern Ireland should mirror the rate on offer in the Republic of Ireland.

Ireland’s 12.5% rate is an ongoing source of tension with several EU member states. 

It is seen as a significant tool in attracting foreign direct investment to Ireland.