Noonan tackles France over tax rate

Wed, Mar 16, 2011, 00:00

MINISTER FOR Finance Michael Noonan went on the offensive yesterday against France over corporate taxation, saying its effective tax rate is lower than the Irish rate it wants increased.

The sharpening of the Government’s rhetoric came as German finance minister Wolfgang Schäuble declared that US treasury secretary Timothy Geithner has complained that too many American companies were investing in Ireland for tax purposes.

Mr Schäuble did not elaborate, but told reporters at an EU finance ministers’ meeting that Ireland’s 12.5 per cent corporate tax rate “can’t stay like this”. Solidarity was not a one-way street, he added. Referring to corporate tax, he said “if Ireland wants something additional from us, then we can raise that issue”.

Although Italy rowed in behind Ireland, Austria joined the clamour for a quid pro quo in return for lower bailout costs.

The skirmishing on tax came as the European Commission prepared to publish legislative proposals to establish an EU common consolidated corporate tax base (CCCTB). While Taoiseach Enda Kenny has said he opposes such moves as they introduce tax harmonisation by the back door, EU economics commissioner Olli Rehn said Ireland should be “constructive” in the debate. “I would only encourage a constructive approach by Ireland on policies related to taxation, especially the commissions proposals on CCCTB,” the commissioner said.

Speaking earlier, however, Mr Noonan said there would be no movement on tax from the Government. As he left Brussels, the Minister said he had pressed Ireland’s case at a breakfast meeting with centre-right ministers in European People’s Party (EPP) group.

“I briefed them on the Irish situation and particularly on the corporate tax rate, and there was significant support for Ireland’s position,” he said.

“There was an awareness as well that there’s a clear distinction between nominal rates of corporate tax and the actual effective rate that’s applied.

“I was pointing out to them that, while our rate was 12.5 per cent, we had eliminated practically all allowances so our effective rate was over 11 per cent, whereas France, with a 32 per cent nominal rate, had an effective rate of 8.1, the research would show.”

Mr Noonan would not say from whom he received support at the meeting of the EPP group, to which the German and French governments are attached.

“There’s a range of views across Europe and obviously there are some people who are quite supportive of our position,” he said.

“We know the French position from Mr Sarkozy’s meeting with the Taoiseach. We know that the French are putting pressure on for movement by Ireland, but I’m afraid it’s not going to happen.”

Italian minister Giulio Tremonti, whose government is affiliated to the EPP, said Europe should not force change from Ireland on the tax. “If you take it away at once, it is not productive for us or for them. It is wise be tolerant,” he told reporters.

“They have enormous difficulties and they are asking for help. It could be wise to give them a hand.”

However, Austrian minister Josef Pröll said Ireland should offer reciprocal tax measures as the price of lower bailout costs.

“If Ireland wants to have concessions, it must also do something . . . Ireland should say now what it wants,” he said.

“It was shown by Greece – for an extension of the periods of credits to Greece, they had to raise €50 billion through privatisations. Now we’re waiting to see what the Irish Government can do in return for their request.”

Mr Noonan reiterated the case that new bank capital required on foot of ongoing stress tests may raise the spectre of an unsustainable bank debt burden on top of Irish sovereign debt.

“As soon as we get the result of the stress test, we’ll have to draw a deep breath and think what we’re going to do next but my intention is to proceed with a restructuring programme for the Irish banks as soon as I have adequate information to justify the decisions,” he said.

“I’m just signalling a situation which may emerge so that the bank and troika [ie the ECB, EU and IMF] are aware of the fragility of the position and that when it comes to restructuring the banks they have to give us some leeway.”