The challenge will be to bolster Northern Ireland's under-achieving economy, and the deadline for submissions to the Varney Review set up to investigate how tax policy can support economic growth passed last week.

David Varney, former head of Inland Revenue and chairman of O2, was appointed by Gordon Brown before he took the reins from Tony Blair to lead a review of the North's tax rules. He has been tasked with reporting back to Brown before the new British prime minister announces his public spending settlements in the autumn. The big question is whether will Varney recommend a cut in the corporate tax rate to 12.5%, bringing the six counties into line with the rest of the island.

The Sunday Tribune understands " a couple of dozen" submissions were received by the Northern Ireland Tax Review last week, and extrapolating from a poll of bodies known to have made representations, the evidence points to a clarion call to reduce the tax paid by companies. However the call may be falling on deaf ears.

"It's highly unlikely we'll get a 12.5% rate here, " predicts Alan Bridle, head of research at Bank of Ireland in Northern Ireland. "I just don't think it's in the DNA of the Treasury in London. They use a very centralised fiscal model where they use fiscal expenditure to substitute for regional flexibility across the UK."

One of the main political concerns in London is that reducing corporate taxes in Northern Ireland, or allowing the Stormont Assembly to set the rates, might provoke similar demands from areas of Britain outside the economic powerhouse of southeastern England. Scotland's first minister, Alex Salmond, is known to favour an alliance of outlying regions to press London for lower taxes.

The attraction for the Republic, according to Ibec senior economist Fergal O'Brien, is in terms of "spinoffs" from foreign direct investment going into Northern Ireland. Companies encouraged to set up in the North would naturally look to suppliers and clients in the Republic because of proximity and competitiveness.

"We would not feel threatened that Northern Ireland would become a competitor, and in the increasingly competitive global market, a stronger all-island economy is better placed to compete against the low-cost economies of eastern Europe, " he said.

Gordon Brown reduced the UK corporation tax rate by 2% to 28% in his last budget, but this is still more than double the 12.5% rate in the Republic . . . often heralded as a cornerstone policy for attracting foreign direct investment and the creation of the Celtic Tiger economy.

Bank of Ireland, the Irish Association of Chartered Accountants, the Northern Ireland Centre for Competitiveness, the Confederation of British Industry, Ibec, the Institute of Directors, the Northern Ireland Industrial Task Force, the Northern Ireland Chamber of Commerce and Industry and several academics are known to have made submissions seeking a cut in Northern Ireland's corporate tax rate, allied with a reduction in government expenditure.

Ulster Bank and AIB declined to comment on the substance of their submissions, and the cross-party submission from the Executive is understood to have argue that a reduced Northern Ireland tax rate would benefit the rest of the UK.

Supporting a reduced corporate tax rate in Northern Ireland is also part of the Fianna Fail-Green Party agreed programme for government.

The fears in London, though, are that a low corporate rate in Northern Ireland would encourage transfer pricing . . . where companies would set up a 'brass plate' entity in Belfast to channel profits because of a lessened tax exposure . . . and that the European Union would come down heavily on British authorities for creating an anti-competitive state aid for Northern Ireland.

The Irish Association of Chartered Accountants has drawn up a detailed paper to counter some of these fears. It claims the Azores judgment, when the European Court of Justice ruled Portugal could levy a different rate of corporate tax on its Atlantic island territory, counters the illegal state aid concern, and that double taxation agreements between the UK and other states would take care of transfer pricing.

"The reality is that you have to have a proper trading process here to avail of the low corporate rate, " said Brian Keegan, tax director at the IACA. "And we are part of a network of international double taxation agreements, including 50 bilaterals with mostly OECD countries, that prevent the artificial shift of profits."

One shared fear in London, Belfast and Dublin is that an under-performing Northern Ireland economy could waylay progress on creating political stability. George Quigley, chairman of Bombardier and a member of the Industrial Task Force that first championed a lower corporate tax rate, believes this to be true.

"Northern Ireland needs reduced tax rates amongst other measures to attract the innovative businesses that will be the future, " he said.

"The UK government itself has been innovative in terms of political engineering to set up the Executive, which is a remarkable achievement. It would be inconceivable that any government would now leave the job incomplete and leave these guys without the tools to finish the job."