Corporation tax rate in line of fire as EU finance ministers take aim
European Commission President Jose Manuel Barroso said that before taking any definite stand on a bailout, the EU would first assess Ireland's situation
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The threat to Ireland's low rate of corporation tax re-surfaced in Brussels yesterday, after the Italian finance minister said the current rate of 12.5pc may have to be "phased out".
French Finance Minister Christine Legarde raised the subject at a lunch of European finance ministers yesterday.
Italy's Giulio Tremonti said the current rate may have to change if that was demanded by the IMF and the EU, while Austria's Finance Minister Josef Proll also raised the question of demanding that the Government increased its low corporation tax rate in exchange for international help.
The Government appeared to have had some success in saying that the issue should not be raised in the talks with visiting officials from the EU, ECB and IMF.
Finance Minister Brian Lenihan said corporation tax was protected under the EU's Lisbon Treaty. "Of course, our corporation tax is safe because that's the matter which is safeguarded by the (Lisbon) Treaty," he said. But several countries are known to feel that the controversial low tax rate should be part of any conditions on a "bailout" package of loans.
European Commission president Jose Manuel Barroso said yesterday: "I want to be absolutely clear; we are not putting pressure on Ireland to resort to the financial assistance mechanism. But I reiterate that the EU mechanism is available and ready to be used if requested.
"Before taking any definite position, we should assess the situation." In Dublin yesterday, Friends First chief economist Jim Power said the 12.5pc rate could probably be saved. "But the Common Consolidated Tax Base which would harmonise the way corporate profits are calculated, is coming anyway.
"If multinationals regard the 12.5pc rate as such a key part of 'Brand Ireland', it shows that we must do something about our general competitiveness," he said at the launch of his quarterly commentary for Friends First.
"We cannot devalue the currency, so we must have a real reduction in costs. I reckon another 20pc fall is needed, and that must include reductions in commercial rates and other government costs, as well as the cost of legal and other business services."
- Emmet Oliver in Brussels and Brendan Keenan
Irish Independent
