Why it matters: Reduced tax on corporate profits is a lucrative carrot in attracting investment and new jobs.Current regime: Companies established in the International Financial Services Centre (IFSC) and Shannon before 2000 benefit from a tax ceiling of 10 per cent until 2005; manufacturing exporters will enjoy the same benefits until 2010. The service sector, by comparison, is taxed at 36 per cent on the bulk of its profits.
The EU's position: Special tax regimes distort the market, lead to needless competition between member-states and should be harmonised.
What's at issue: The timescale in which this should be achieved.
Government policy: It is committed to maintaining the 10 per cent rate until at least 2025 and progressively to cut other corporation taxes to that level. But it may settle for a figure of 12.5 per cent.
The likely EU approach: Newcomers to the IFSC, Shannon and the promised enterprise zones in the post-2000 period should pay tax at the prevailing general rate.
The Irish response: Unthinkable!
The likely compromise: Dublin may agree to speed up the promised reduction in the 36 per cent rate to a new common level, but with significant budgetary implications.
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