Irish corporate tax rate on agenda in Berlin

Germany’s opposition Social Democrats (SPD) are likely to turn Ireland’s corporate tax rate into a campaign issue in Germany’s general election, according to Labour TD Dominic Hannigan, who met politicians in Germany.

Mr Hannigan, chairman of the Dáil’s Joint Committee on EU Affairs, told members of the Bundestag’s EU committee that Ireland’s recovery was “precarious” and dependent on allowing the ESM bailout fund to recapitalise Irish banks “on a shorter time scale”.

“We’re not talking about a huge amount of money – several tens of billions of euro, which is not going to empty the ESM pot,” he said. “Most seemed to get that there are extenuating circumstances as to why Ireland should benefit. At least they didn’t argue.”

Chancellor Angela Merkel’s government has made bank recapitalisations dependent on a series of banking and financial reforms. At a meeting with Mr Hannigan in Berlin, strongest opposition on bank recapitalisations came from the SPD.

“The ESM rescue fund is not a bank rescue fund and cannot be used as such,” said Carsten Schneider, budgetary spokesman for the SPD, German sister organisation to the Labour Party. “Dr Merkel may have agreed to that but we didn’t, and there’s nothing in the Bundestag vote that mandates for that.”

If the SPD wins next September’s election Mr Schneider said his party would block bank recapitalisations and reopen the debate on European tax competition. “If a country wants more solidarity it is clear that individual responsibility plays a role and we don’t want to see dumping tax rates inside the EU that erode the tax base.”

Mr Hannigan said he had the impression the SPD “want to see some action” on tax competition. “We gave a robust defence of the Irish position but I don’t think it’s going to go away.”

More conciliatory tones came from the ruling Christian Democratic Union (CDU), European sister party of Fine Gael. CDU politician Gunther Krichbaum, head of the Bundestag EU affairs committee, said the European tax debate was not over but was ill-suited for election campaigns. Asked about SPD remarks on “dumping tax rates”, he said: “I don’t think much of that, nothing at all.

“We have no reason to doubt Ireland’s reliability; for us Ireland is an example in the EU.”