Harney resists EU pressure on taxation policy

 

Calls for increased harmonisation of taxes across the EU at the European summit in Portschach at the weekend have been rejected by the Tanaiste and Minister for Enterprise and Employment, Ms Harney.

The Tanaiste said that Ireland's corporation taxes were due to converge on 12.5 per cent by 2003, a process that was "enshrined" in an agreement with the Commission.

"Business in Ireland, whether foreign-owned or Irish, can be assured of this position - and there is no threat to it," she said.

Ms Harney was responding to calls from a number of Europe's leaders, including the new German Chancellor, Mr Gerhard Shroeder, for reinforced economic co-ordination, including tax harmonisation, in the new era of the euro.

Closing the summit, the Austrian Prime Minister, Mr Victor Klima, spoke of a consensus on the need to combat "harmful tax competition".

The Commission is also due to prepare a paper on increased economic co-ordination for December's Vienna summit.

"Co-ordination" is a word Irish ministers have no problem with, even in relation to codes of conduct on corporate taxation, as it does not have the connotation of compulsion. However, there was a clear sense at the meeting that most leaders want to go further on tax harmonisation. But they will only be able to do so, under EU rules, by unanimity, and several states, Ireland and the UK included, are firmly opposed.

"Instead of calling for what would effectively be higher corporate taxes, European leaders should be concentrating on bringing corporate and other taxes down to stimulate job growth," the Tanaiste said yesterday. "The Irish experience should merit closer study, not attack."

"When taxes are low, things happen; when taxes are high, things don't happen or happen elsewhere. Despite its low rate, the Irish corporate tax yield is high because of its very broad base," Ms Harney said, also drawing attention to the US's low corporate tax rates and relative success in creating jobs.