Call on Cowen to 'firmly' reject EU tax 'pressure'
The American Chamber of Commerce in Ireland has issued a strongly-worded statement calling on the Taoiseach to "categorically rule-out" any increase in the country's corporation tax rates following comments by the EU commissioner for economic and monetary Affairs Olli Rehn earlier today.
Speaking to reporters in Brussels, where he was attending a meeting of EU finance ministers, Mr Rehn foretold an end to Ireland's status as a low tax base.
His comments follow yesterday's announcement from the Central Bank on the cost of the bank bailout plan, after which Taoiseach Brian Cowen and Minister for Finance Brian Lenihan signalled tougher austerity measures would have to be introduced in the forthcoming Budget.
Asked if he believed Ireland's rate of corporation tax should be included in moves to increase tax revenues, Mr Rehn said: "I do not want to take any precise stand on an issue which is a matter for the Irish Government and the Irish parliament to decide."
He added: "I would not rule out any option at this stage since we know that Ireland is not going to be in the coming decade, it's a fact of life, Ireland will not continue as a low tax country. But it will rather become normal tax country in the European context."
Competition commissioner Joaquin Almunia said the EC is in favour of Ireland asking subordinated bondholders in Anglo Irish Bank to share some of the cost of winding down the nationalised lender.
"This is in line with the Commission's principles on burden sharing since it both addresses moral hazard and limits the amount of aid, with benefits to the taxpayers," Mr Almunia said in a statement.
This evening, Mr Rehn's comments were roundly condemned by the American Chamber of Commerce in Ireland.
The chamber called on Mr Cowen to "categorically rule-out" any increase in the country's corporation tax rates and to "clearly and firmly" remind the EU that Ireland retains sovereignty in taxation matters.
Lionel Alexander, president of the American Chamber of Commerce in Ireland said: "At a time when the economy is in deep recession, nothing which would impact on the continued investment in Ireland by our existing base of multinationals, or would deter new investment in Ireland can be countenanced".
He called on Taoiseach Brian Cowen to send "a very clear message" that there will be no increase in Irish corporation tax rates.
According to the chamber’s figures, some 100,000 people in Ireland are directly employed by more than 600 US firms. In 2008, US firms in Ireland paid €2.5 billion in corporate tax, about 40 per cent of the State’s total corporate tax take.
"This is a very serious issue. We have to realise that we are still way out of line in terms of our cost competitiveness and Ireland's competitive corporation tax rate is one of the few competitive advantages we have," Mr Alexander said.
Meanwhile, UCD Colm McCarthy, lecturer in economics at UCD and chair of the committee that advised the Government on fiscal cuts last year, said elements of the so-called 'Bord Snip' report may need to be revisited. He also suggested that large-scale infrastructure projects might be put on hold.
Financial markets have reacted positively to yesterday's announcement of the expected final cost of the bank bailout, the National Treasury Management Agency (NTMA) said today.
The agency, which is responsible for managing the State’s debts, said the cost estimates, together with the Government's signalling of a stricter budgets over the next four years have been well received.
Bond yields continued to decline today after falling back slightly yesterday. The interest charged on ten-year bonds is at 6.33 per cent this evening, after dropping 14 basic points to 6.56 per cent following the Central Bank's announcement yesterday.
The State has issued €20 billion worth of bonds this year. Yesterday, Minister for Finance Brian Lenihan said that the Republic was “fully funded” up to next June.
As a result, the Government is not going to return to the bond markets for another three months. It hopes that this will give it enough time to clear up the uncertainty around the State’s future finances, and that the interest charged on Government debt will have fallen to more reasonable levels.
Speaking on RTÉ radio earlier today, NTMA director of funding and debt management Oliver Whelan said the forthcoming Budget would have an impact on when the NTMA would consider returning to the bond market.
"Towards the end of the year we will sit down and assess, in consultation with our banks and the markets, the appropriate time to come in but we would expect that it would be in fairly early in 2011," he said.
Elsewhere, the Iseq index of leading ended the day in negative territory, down 14.15 points at
Shares in Bank of Ireland were up 2 cent to 64 cent while AIB was down 3 cent to 47 cents.
According to the Central Bank, in a best-case scenario, Anglo will cost €29.3 billion, which will leave the taxpayer with a bill of €45 billion for the system as a whole.
The total bill includes €15.7 billion to prop up four other institutions: AIB and Bank of Ireland and two mutuals, Irish Nationwide Building Society and the EBS.
AIB will receive a total of €6.5 billion and the Government will get effective control of the bank in return. Bank of Ireland has already been given €3.5 billion and does not need any more. Irish Nationwide will get €5.4 billion and the EBS €350 million.
The State’s National Pension Reserve Fund (NPRF) is providing funding for AIB and Bank of Ireland while the rest are being funded by the exchequer.
The Central Bank explained yesterday that the performance of the Irish commercial property market will ultimately determine the size of losses. The best-case assumes that values will fall to 30 per cent of the peak that they reached at the beginning of 2007, but recover to 57 per cent of the peak by 2020. The worst-case assumes that values fall to 35 per cent of the same peak and stay at that level for the next 10 years.