Ministers to hold firm on tax at EU meeting


THE GOVERNMENT has insisted it will not budge on Ireland’s 12.5 per cent rate of corporation tax during this week’s summit of EU leaders as it tries to secure a reduction in the interest rate Ireland is paying on its €85 billion rescue package.

Ahead of today’s meeting of euro zone ministers in Brussels, which will be attended by Minister for Finance Michael Noonan, and of the summit meeting of the 27 EU leaders later this week, several Ministers yesterday said Ireland was willing to cede on a number of issues to secure a lower interest rate. However, all said the corporation tax was off the agenda.

One concession being mooted by Government sources yesterday included engagement on some form of legislative mechanism that would prevent the Government knowingly exceeding agreed deficit limits when drawing up fiscal plans or budgets.

The other concession – greeted with less enthusiasm on the Government’s part – would result in engagement on last week’s European Commission proposal for a Common Consolidated Corporate Tax Base (CCCTB), which outlines a single set of rules that companies operating within the EU could use to calculate their taxable profits.

The euro zone meeting is a technical one that will seek to increase the lending capacity of the bailout facility from €250 billion to €440 billion.

It is likely to see an increase in the guarantees made to the fund by the 17 euro zone countries, although there will be political implications for triple A-rated countries such as Germany.

Agreement on this issue has been viewed as of critical important in advance of the summit this week. If no agreement is reached tonight, the euro zone finance ministers may need to meet again.

The summit of leaders will mark the culmination of many months of negotiations to reach agreement on an overhaul of the EU’s bailout fund that would be significant enough to lessen pressure on weakened euro zone countries. The situation facing Portugal, in particular, is now being viewed as critical.

From an Irish perspective, the prime concern is to preserve the corporation tax regime, while securing a lower interest charge on the bailout loans. Government sources accepted yesterday that it will be exceptionally difficult but pointed to growing support for Ireland’s position.

The consolidated corporate tax base would not in itself affect Ireland’s corporate tax rate but rather will focus on the base on which tax is calculated. That could have an indirect effect on the effective tax rate being applied in some member states, including Ireland.

A spokesman for Mr Noonan said yesterday the consolidated tax base did not pose an immediate threat. The proposal has been around for years, and the Government anticipated “many more years of work before any final proposals will fall for consideration”.

Minister of State for Finance Brian Hayes said the key issue for Ireland ahead of the council meeting was Enda Kenny’s “very firm stand” on corporation tax.

“I think there’s a willingness there to resolve the issue on a pan- European basis to allow the Irish economy and other countries to experience growth again. Without that we are going nowhere.

“The right result is to get a reduction in interest payments in the EU part of the [rescue] package. We will negotiate with others on the range of options to achieve this. The important thing is that there will be no dilution of the 12.5 per cent corporation tax rate that has been such an engine of growth,” he told RTÉ.

On the consolidated tax base, he said the issue had been around for years. “We will look at all those issues in the round. It’s good to shine a light on the effective corporation tax rate of others.”