Corporation tax: ‘Cornerstone’ of recovery will remain intact
IRELAND’S low corporation tax will not be increased over the next four years, despite ongoing pressure from Europe for a hike as part of the IMF/EU bailout.
The 12.5pc tax rate on company profits is a “cornerstone” of our economic recovery and will not change, the Government said in the national recovery plan.
But European politicians were still piling more pressure on Ireland to hike the rate yesterday.
The corporation tax rate is the envy of many other countries, giving Ireland a competitive advantage when attracting foreign investment from multinationals.
The rate here is one of the lowest in Europe and the lowest of the 16 eurozone countries.
“A low rate of corporation tax on export-oriented activity has been a cornerstone of our industrial policy since the 1950s, and the 12.5pc rate is now part of our international ‘brand’,” the Government said yesterday.
It added that the tax has been used to promote research and development projects by multinationals.
While companies like Google, Intel and Hewlett-Packard pay less profit tax than they would in many other European countries because of the rate, they also employ close to 100,000 people directly and many others through spin-off industries.
The tax is also a big contributor to the Exchequer, and has raised more than €2.6bn so far this year.
The maintenance of the rate was welcomed by business groups and representatives of US multinationals yesterday.
“The multinational sector is the one sector of the economy that has performed in the last year,” said Joanne Richardson, chief executive of the American Chamber of Commerce. “Jobs and investment won by Ireland are jobs and investment won for the entire EU and, as Ireland returns to economic growth, it will ultimately contribute to a stronger European economy.”
According to business representative group IBEC, keeping the tax at 12.5pc will help to improve the labour market and get people back to work.
But a cross-party group of MEPs, excluding Irish politicians, proposed yesterday that the rate should be hiked to 25pc to bring it in line with the European average.
They tabled a motion in Strasbourg demanding a single European rate of tax.
“Introducing a common corporation tax in Europe is the only way to limit tax competition and the damaging effects this has on the European economy and European solidarity,” German Green MEP Sven Giegold said.
Meanwhile, a group of trade unions, charities and community groups said it is unfortunate the Government hasn’t put as much energy into protecting the poor as it has big business through its fight to maintain the 12.5pc rate.
“We challenge the political system to protect the minimum wage and basic social welfare payments with the same determination it has fought to preserve Ireland’s corporation tax,” Focus Ireland spokesman Mike Allen said.