Fears modification to tax would hurt Ireland


COMPETITIVENESS PACT:AS TALKS continued late last night, diplomats said that the new competitiveness pact described corporate tax measures resisted by Ireland as a “way forward” to boost European business.

Taoiseach Enda Kenny pledged as he arrived in Brussels that he would resist the creation of a common consolidated corporate tax base (CCCTB) because that would introduce tax harmonisation by the “back door”.

While not harmonising the tax rate, a CCCTB would dim the lustre of the Irish regime by making it more difficult for international companies to allocate revenues into Ireland’s low-tax jurisdiction.

Late versions of the draft signed off on last night make it clear that direct taxation remains a national competence but said “pragmatic co-ordination” of tax policies was a necessary element of stronger economic policy co-ordination.

While the texts under discussion referred to imminent European Commission legislation to establish a CCCTB, they did not include a reference to procedures in which some countries would move ahead without countries who oppose the measure.

“Developing a common corporate tax base could be a way forward to ensure consistency among national tax systems while respecting national tax strategies, and to contribute to fiscal sustainability and the competitiveness of European businesses,” said the text under discussion.

Diplomats briefed on the talks said the final version was not substantially different.

The agreement came as German chancellor Angela Merkel welcomed Portugal’s announcement of new measures to curb the budget deficit, saying they are an important step. The country, which has faces record borrowing costs, has been under pressure to avert an EU-IMF bailout

Austrian finance minister Josef Proell, interviewed in the Financial Times, urged Portugal to learn from the lessons of Greece and Ireland, which had delayed requesting help. “Don’t be too late. Make your decision soon: yes or no,” he said.

The draft competitiveness pact will be submitted for the approval of any non-euro leader who wishes to adopt it as part of an anticipated agreement on new measures to step up the battle against the sovereign debt crisis.

The overall package includes a hardening of EU economic governance rules, an enlargement of the scope and scale of the existing temporary bailout fund and a permanent new fund with a mandate to compel private investors to bear costs in bailout scenarios.

Agreement on such measures remains elusive. There was no sign that Dr Merkel, the most powerful euro zone leader, was indicating any willingness to step back from her entrenched opposition to far-reaching reforms to the bailout fund.

Euro zone finance ministers will resume the negotiation of bailout fund reforms on Monday night and the wider group of all EU finance ministers will deliberate on the economic governance measures the following day.

The ministers are on standby for further meetings before a two-day summit in a fortnight if, as expected, they fail to settle their differences next week.