Sir, - Political and economic commentators see the departure of Oskar Lafontaine from the German cabinet as a major relief to Ireland's economy on account of his tax harmonisation plans, viewed as an assault on Ireland's pro-business environment. The argument goes that Ireland attracts investment to its shores thanks to its low corporate tax regime, flexible workforce and generous industry incentives. These "pull" factors have seduced firms currently operating in higher-taxed countries to relocate existing jobs to Ireland.
However, relocation of firms and jobs has contributed directly to the high levels of unemployment found in Germany, France and Italy as well as to a shrinkage of the tax base in these countries, which have fallen victim to bargain basement competition.
While low wages and a flexible workforce do help, our major attraction are the irresistibly low level of taxation and the government hand-outs which the Irish Government offers in an effort to undercut other EU nations and seduce foreign investors. When you add the fact that the infrastructural development which permitted Ireland to transform itself into a high-tech economy was funded by European taxpayers via the "cohesion" fund, it comes as no surprise that people like Lafontaine have sought to halt the trend of major companies jumping on the gravy train and shutting up shop. After all, the Irish Government screams in Brussels whenever its special interests, such as no abortion and farmers' grants, are in jeopardy.
Harmonising tax rates would be a logical way to expunge this unfair competition, as it would create a more level playing field across the EU. Of course "competing" European nations could take a leaf out of Ireland's book and lower their corporate taxation rates to a paltry 12.5 per cent, but this would not solve the problem. Companies would still shop around for the best deal and national governments would be pressured to reduce tax rates even further. They would eventually get away with paying nothing at all. Oskar Lafontaine was merely a more vocal advocate of a reversal of this distortion which amounts to nothing other than a major rip-off of German taxpayers. - Yours, etc., Edward Bressan,
Slievenamon Road, Dublin 12.