Sarkozy attacks Irish corporate tax rate

FRENCH PRESIDENT Nicolas Sarkozy has said Ireland cannot benefit from the EU’s financial aid while maintaining its low corporate tax rate.

Making the case for closer fiscal harmonisation between euro zone states, Mr Sarkozy said: “I deeply respect our Irish friends’ independence and we have done everything to help them. But they cannot continue to say ‘come and help us’ while keeping a tax on company profits that is half [that of other countries].

“We cannot speak about economic integration without the convergence of fiscal systems . . . with [German chancellor Angela] Merkel, we are going to reinforce European economic integration and we’re going to progress towards fiscal convergence.”

The terms of Ireland’s €85 billion bailout by the EU and the IMF do not require any change to the corporate tax rate of 12.5 per cent, despite pressure from some EU states for it to be on the table during discussions last November.

Ireland’s rate is considerably more competitive than France’s, at 33 per cent, and Paris has long accused Dublin of “fiscal dumping” or unfairly attracting investment by keeping it so low.

In yesterday’s speech at the Airbus plant in Toulouse, Mr Sarkozy also said he was determined to proceed with plans to enshrine in France’s constitution a requirement for a balanced budget.

The president said he had instructed prime minister François Fillon to broker talks with political parties on the matter in the coming days. France aimed to narrow the budget deficit to 6 per cent of GDP in 2011 and below the EU’s 3 per cent limit by 2013.

“I want a constitutional rule that will demand a return to balance of our public finances,” Mr Sarkozy said.

Dr Merkel favours binding limits on deficits as a core element of efforts to tackle the sovereign debt crisis buffeting the euro zone.

“French people wouldn’t want France to face the situation that some European partners are facing, wondering at the beginning of each week if they are able to pay their bills,” Mr Sarkozy said.

“France must be independent, cut spending, cut the deficit and pay back some of its debt.”

Mr Sarkozy also reiterated his call for common “European economic governance”.

“We cannot share the same currency while having different economic strategies. It doesn’t work.”