Kenny defends corporate tax

 

A crucial euro zone summit broke up early this morning without any agreement to cut the interest rate on Ireland’s bailout loans after Taoiseach Enda Kenny refused to dilute Ireland’s corporate tax regime.

Mr Kenny came under strong pressure on corporate tax from France and Germany. The Taoiseach met a “tough” reception as he made the case for a substantial reduction in the interest rate on Irish bailout loans.

“It wasn’t possible to reach a deal for Ireland this evening,” Mr Kenny told reporters shortly before 2am.

He said there was acceptance of the principle of an interest rate reduction of 1 percentage point but that he was not prepared to yield any concessions on corporate in return for that.

Mr Kenny acknowledged a "good vigorous and vibrant discussion" with French president Nicolas Sarkozy as he refused to yield to Franco-German pressure to dilute Ireland's corporate tax regime in return for lower interest on bailout loans.

Saying he and Minister for Finance Michael Noonan will engage in the coming days with European Central Bank president Jean-Claude Trichet on a new round of stress tests in Ireland's banks, Mr Kenny said challenging talks lay ahead on the bailout interest rate.

He said a 1 percentage point cut in the 3 per cent "surcharge" on Irish loans was on the table but only if he yielded a quid pro quo on corporation tax.

"It wasn't possible to reach a deal for Ireland this evening. I expect discussions to continue intensively in the next two weeks in this regard. These will be difficult and detailed but I am convinced and remain convinced that . . . we can find a way forward," he said early this morning.

"The question that was being asked of me was to make references to our corporate tax rate. I made it perfectly clear on many occasions that this was not something that I would contemplate and didn't this evening," he said.

Mr Kenny he was not prepared to contemplate either an increase in the tax rate or the introduction of a common consolidated corporate tax base (CCCTB), which he described as a "back door" route to tax harmonisation.

"In respect of both the CCCTB and the corporation tax rate, that for me this was an issue that I couldn't contemplate. But I did say that in respect of other elements of the pact I would of course engage constructively with our colleagues around the table," he said.

"In respect of a good vigorous and vibrant discussion that I had with the French president - I'm not sure whether you'd call it a Gallic spat or not - obviously the French president has very clear views about the corporation tax rate for quite a long time, but then so have I."

Mr Kenny said he offered to engage constructively on the "language about tax" in a new euro zone competitiveness pact, but specifically tied that to the ECB's scrutiny of the banking situation.

"I made the point that for me to conclude a deal here I need to be much clearer in respect of elements related to the ECB," he said.

"I spoke to president Jean-Claude Trichet and the Minister for Finance will be meeting with him on Monday. He has agreed that I should meet with him before the [next EU summit on March] 24th/25th to discuss a number of issues relating to the ECB and its positions.

"Before the council meets again in two weeks time we hope to be in a much clear position insofar as Ireland's position is concerned and continue on our progress arising from the mandate that I've got about an improvement in the terms of the package for Ireland," the Taoiseach said.

He continued: "In the next couple of weeks I expect to be in a much clearer position in respect of the state of what we have inherited is in respect of Ireland's position.

"We'll have had discussions with the ECB in respect of a number of matters. We'll have a much clearer picture of what's emerging from the stress tests and as the principle has now been accepted and implemented of a reduction in the interest rate I . . . would regard that actually as the beginning of a process."

Despite the pressure on tax he faced from Mr Sarkozy and German chancellor Angela Merkel, Mr Kenny said the first principle has been established "that there should be" an interest rate reduction.

"In the case of the Greek prime minister this was set at 100 basis points in his case, an extension of the period of the loans to 7.5 years. He pointed out on several occasions during the meeting that his request would be for a reduction of 200 basis points and that the Greeks would be paying very seriously for an increased extension of the loans," the Taoiseach said.

"The question of the reduction in the interest rates in Ireland's case did not arise specifically because of the view that I took arising from the mandate I have and gave to the people in respect of corporate tax rates and CCCTB."

Mr Kenny said he pointed out that Ireland was the only country in the European Financial Stability Facility scheme.

"I did point out . . . that this requires very stringent responses from Ireland and the Irish people, that for those who happen to be in a package like this . . . that it's not a very easy position to be in, that Ireland had a strong potential in terms of its growth rates, its export potential . . . and pointed out the scale of what's actually involved here."