Tax rates 'will not be dictated'

 

Ireland's position on the corporate tax rate will not be dictated by the “electoral cycle” in any other member state, Tánaiste Eamon Gilmore has told the Dáil.

He said: “12.5 per cent is our rate of corporation tax and we are not in the business of changing it."

He was responding to Independent TD Shane Ross who called on the Government to stop “dancing to the Merkel-Sarkozy duet”.

The Government is facing a new threat to its corporate tax regime as Germany and France push for the acceleration of moves to create a pan-European business tax system.

The Dublin South TD questioned plans by Germany and France to create a Europe-wide business tax system.

Mr Ross said everyone knew the pressure on the corporate tax base and the financial transaction tax “is an electoral gimmick by two very powerful nations”.

He asked the Tánaiste “how long are we going to put up with this extremely unhelpful and hostile attitude from Merkel and Sarkozy”.

Since the Government came into power, “we have been suffering at the electoral designs of Sarkozy and Merkel," he said.

"Isn’t it time that we said to them that we’ve had enough of this, that we are not going to be victims of the Franco-German political domestic agenda for any longer".

He said Ireland should be saying: “We’re an independent country and our interests are putting Ireland first and not dancing to the Merkel-Sarkozy duet”.

However, Mr Gilmore said he was “not surprised from time to time to see the proposal re-emerging” about the corporation tax rate, adding people should look at the Government’s record.

"When the issue of the corporation tax rate was put very forcibly on the agenda by other member states - we very vigorously and effectively rebutted and refuted that argument,” he said.

The Government had made its position clear, “and I believe we won that argument” on the importance of the rate for invesment, Mr Gilmore said. The Government had communicated that message at EU level, bilaterally, globally, the Minister said.

He added: “12.5 per cent is our rate of corporation tax and we are not in the business of changing it”.

Mr Gilmore said they should not be surprised by the “re-emergence of that proposal in the case of some countries having regard to the electoral cycle in those countries”.

French president Nicolas Sarkozy is seeking re-election this year and Germany also faces elections.

Mr Gilmore insisted “our position is not going to be dictated by the electoral cycle in any other member state”.

The renewed clamour for tax co-ordination is set out in a package of measures to stimulate the European economy, which Germany and France want to discuss at two EU summits in the next six weeks.

The two powers, which dominate Europe’s response to the debt crisis, say in a private submission to European Council president Herman Van Rompuy that urgent measures are required to secure economic growth.

In a paper seen by The Irish Times, they highlight “tax co-ordination” as being among the policies required to bring this about. These include a quickening of moves to create a common consolidated corporate tax base (CCCTB), an initiative once dismissed by Taoiseach Enda Kenny as tax harmonisation by the “back door”.

The CCCTB would not harmonise tax rates but it would create a pan-European tax system for firms operating in more than one country.

The Government fears this would diminish the attraction of the Irish regime by making it more difficult for multinationals to take advantage of the low 12.5 per cent tax rate.

French president Nicolas Sarkozy has major reservations about the Irish policy. With the support of German chancellor Angela Merkel, he repeatedly pressed Mr Kenny last year to dilute the regime in return for an interest rate cut on Ireland’s bailout.

The Taoiseach refused to yield but pledged to constructively engage in talks on draft EU legislation to establish a CCCTB.