SPD places Irish corporate tax rate at centre of coalition talks

Germany’s Social Democrats (SPD) have vowed to put Ireland’s corporate tax rate and its opposition to an EU financial transaction tax onto the agenda of looming coalition talks in Berlin.

Leading SPD officials say they were optimistic of further progress at this evening's second round of exploratory talks with Angela Merkel's Christian Democratic Union (CDU).

Three weeks after the CDU won Germany’s federal election, official coalition talks are still some way off but it appears most likely that the CDU and SPD will agree to commence coalition talks in the next week with a view to forming a second grand coalition under Dr Merkel’s leadership.

There were mixed signals today from the SPD on how big a role EU affairs - such as Ireland’s finances and its looming return to financial markets - would play in the talks.

SPD budget spokesman Carsten Schneider attracted attention last week for saying his party would only back precautionary funding for Ireland as it returns to financial markets if Dublin moved on its corporate tax rate.

He added that his party opposed direct financing for Irish banks from the ESM bailout fund. Ireland could only expect external funding for its banks by reversing its opposition to a financial transaction tax and participating in the planned eurozone-wide scheme.

This afternon SPD general secretary Andrea Nahles said Mr Schneider's Ireland-critical remarks reflected SPD policy and were shared by a majority of senior party figures.

“I am very sorry for Ireland but I am afraid the corporate tax rates are too low,” she said this afternoon at the SPD’s Berlin headquarters after a meeting of the party’s governing board.

Some senior SPD officials say Ireland is unlikely to play a role in the ongoing preliminary talks but could raise its head when coalition talks proper begin -- likely to be as early as next week.

Another senior SPD politician, departing today’s meeting and speaking on condition of anonymity, was more circumspect. While Mr Schneider’s remarks reflected official party policy and election promises, the SPD politician said, they had to be seen in the context of megaphone diplomacy that always accompanies coalition talks in Berlin.

”None of the issues relating to Ireland are likely to prove a serious stumbling block in talks,” said the senior party source to the Irish Times, citing a minimum wage and other domestic concerns as of political priority. “The rest is all background music.”

Taoiseach Enda Kenny told RTÉ’s “The Week in Politics” that the Government had “no intention” of changing the 12.5 per cent corporate tax rate.

Last week Fianna Fail leader Micheál Martin urged Tánaiste Eamon Gilmore to tell leaders in the SPD, Labour's German sister party, that their "posturing on the future of Ireland's corporation tax regime is unacceptable and must stop".

Mr Gilmore is well used to it, after hearing similar remarks from the SPD during his visit to Berlin exactly a year ago. During a podium discussion in the German capital in October 2012 Peer Steinbrück, the SPD’s challenger in last month’s election, said that Ireland’s corporate tax rate and its hopes of direct ESM bank recapitalisations were political bones of contention in the SPD.

Mr Steinbrück said his party was in favour of a harmonised “tax corridor” for corporate tax rates in the EU.

"If Germany is making available its creditworthiness to others, we expect others to improve their own revenue base," said Mr Steinbrück in October 2012.

Senior officials in Berlin's finance ministry concede that movement on Ireland's corporate tax rate is unlikely in the foreseeable future. However they say Dublin should not underestimate the determination at EU level to move against legal tax avoidance schemes, such as those operated by multinational companies via Ireland and the Netherlands.