German ambassador disputes tax study

The German ambassador has said his country disputes a study which found that the effective rate of corporation tax in France was higher than in Ireland.

Dr Eckhard Lübkemeier clashed with Fianna Fáil TD Timmy Dooley at the Oireachtas Committee on European Affairs over the possibility of a common consolidated corporate tax base (CCCTB).

The ambassadors of Germany, France and Spain all attended the committee today to discuss the issue of the fiscal compact which will now be put to a referendum in Ireland.

Dr Lübkemeier asked Mr Dooley to show him the documents which suggested that there would be winners and losers if CCCTB was every introduced and Ireland would be one of those losers.

The German ambassador then went on to reference a report called Paying Taxes 2011 published by the World Bank and PricewaterhouseCoopers.

It found that though the headline corporation tax rate for France was 32 per cent, the effective rate was 8.2 per cent while Ireland’s effective rate was 11 per cent though the headline rate was 12.5 per cent.

Dr Lübkemeier continued: “There was this famous PriceCooperWaterhouse report that the effective tax rate was higher in France than in Ireland.

“I just want to make it clear from our point of view this is not the case. From a German point of view, we dispute this study. It was taken up several times and I thought I should respond to this.

“Tax harmonisation is not on the table in my view. What is on the table is CCCTB and that is tax base harmonisation and, by the way, you are committed to discussing this.”

He described CCCTB as a “side issue” and “not as an ambassador but as a German citizen it should not be put forward in a referendum campaign in this country again.”

The French ambassador Emmanuelle d’Achon said her Government had got the message that Ireland did not want any change to the corporation tax rate of 12.5 per cent. It had been explained by Ireland “at length” in France and in Brussels.

She said at a time of “bailouts and austerity” it would be “very wrong and a red line for Ireland”.

“We have understood the message. We know it is not the time for you to discuss this at the moment,” she said.

However, she said the issue of fiscal convergence should be discussed in the future. She praised Ireland and said the country’s reputation was much stronger than it was a year ago.

She said the Irish people had shown “courage” in correcting the public finances. She had heard “very optimistic views” at the financial institutions in Luxembourg regarding Ireland’s ability to return to the markets.

“If I might modestly make a comment, your image is so much better than it was a year ago,” she said. “For the people of Ireland to show once again that they do believe in Europe, that they appreciate what has been done for them thanks for the solidarity of their partners, is of the essence at the moment. We hope you will do the campaign in a sort of way that will encourage your people to say yes.”

The Spanish ambassador Javier Garrigues said Spain was a “great admirer” of how Ireland was recovering from recession. He said the fiscal compact constituted a “balanced approach” in relation to the need for both fiscal consolidation and the introduction of stimulus to the job creation.

In response to a question from Fine Gael TD Joe O’Reilly, who said a no vote on the Fiscal Compact would be “dire” for Europe and Ireland, Dr Lübkemeier said he would not indulge in scaremongering.

Fine Gael Senator Fidelma Healy-Eames said Germany was rebuilt with Marshall Plan money but German chancellor Angela Merkel was against bolstering the EU’s bailout fund when so many people see the firewall as being necessary.

Dr Lübkemeier said Germany had its own “painful” measures in terms of regaining competitiveness in the global markets and German workers had no real increase in wages for many years, but the country was now able to borrow money at 1 per cent.