Harney could face cool reception at EU meeting

 

The announcement by Boston Scientific is likely to add spice to the difficult negotiations between Ireland and the Commission on the future of its corporation tax regime - not least because they are being conducted with the Belgian socialist commissioner.

And the Tanaiste, Ms Harney, can expect a few sour comments from her Belgian and Danish colleagues when she joins them at an Industry Council this week.

While a couple of hundred jobs were also lost in Denmark, the move by Boston Scientific to Ireland of its 273 Belgian jobs at Petit Rechain in 1996 became a particular cause celebre here. It could not have come at a worse time. Only weeks later, Renault closed its plant at Vilvoorde and moved several thousand jobs to Spain, and the Boston precedent seemed to prove conclusively that EU funds were being abused systematically to poach jobs from one EU country to another.

The fact that the European Commission has carried out an investigation into the Boston move and found this not to be the case has done little to pacify Belgian politicians.

Only last week, the Belgian EU Commissioner for Competition, Mr Karel van Miert, was again grilled over the issue in the European Parliament by Belgian and Danish MEPs. And Boston Scientific was again in the Belgian courts in a dispute with its former employees.

They had argued successfully that as the closure had not been for economic reasons they were still entitled to a range of payments. On appeal in Liege on Wednesday the court found that the reason for closure was not relevant, but the company is back in another court this week again over its failure to consult its workers properly over the closure.

The row has certainly given impetus to the attempts by the Commission to persuade memberstates to commit themselves to ending what has been seen as unfair tax competition between member-states. And only last week the fruit of those discussions was a somewhat tame "code of conduct" on company taxation which commits member-states to harmonise corporation tax rates internally. The code does not affect competition between member-states, to the intense irritation of the Belgians and the Danes, and so is likely to be acceptable to Dublin.

Unanimity voting on taxation issues means that a tougher code is simply not politically feasible at present. Irish officials insist that the low tax rate for manufacturing exporters is so central to the country's jobs strategy that there is no question of any going back on it.

They also insist that companies invest in Ireland for all sorts of other reasons - language, access to the EU market, the skills and enthusiasm of our young people, their wage competitiveness, the friendliness of the country . . .

But, in parallel to the negotiations on the code, Mr van Miert has been conducting talks with Minister for Finance, Mr McCreevy, and Ms Harney about the "State aid" dimension of our tax regime. While the Commission has given permission for the exporters regime and that in the IFSC, it is now saying that post2000 it will not be so happy to see discrimination against other manufacturers and wants newcomers to pay the standard 35 per cent.

The nub of the issue is understood now to be how fast Mr McCreevy will introduce the common rate of tax promised for 2010, whether at 12.5 per cent or 10 per cent.

That Boston Scientific should now rub salt in the Belgian wound will scarcely facilitate compromise. It is simply too easy now to say that the Celtic Tiger should be able to stand on its own feet without the benefit of the sort of EU props that poor countries get.