Monday 30 May 2016

Germans want Irish tax reform in return for deal on IMF loans

Colm Kelpie and Thomas Molloy

Published 09/10/2014 | 02:30

Michael Noonan
Michael Noonan
Stephen Moloney from GMIT Galway at yesterday's protest.

THE German Parliament voted overwhelmingly in favour of Ireland's plan to save money by re-paying IMF loans early - but warned we must reform our tax system.

In a debate in the Bundestag, German parliamentarians praised Ireland for sticking to the bailout programme, while demanding that we use the €2bn that will be saved over the next seven years to slash debt rather than financing tax cuts.

But deputy finance minister Steffen Kampeter warned that Ireland was "doing itself no favours" in giving multinational companies based here "a huge tax advantage compared to European companies."

"Solidarity is not a one-way street, we expect from Ireland solidarity with its European partners, for example in tax questions," he said.

The Bundestag budget committee called on Angela Merkel's government to campaign against tax rules which allow big companies to avoid almost all taxes. The European Commission is currently examining Ireland's agreements with Apple.

But the vote in favour of Finance Minister Michael Noonan's plan to repay the IMF early was an important step for Ireland.

All of the countries that stumped up cash for our bailout must agree to the changed terms, which would mean the IMF is repaid before they are.

Only the German opposition Left Party voted against, while the Greens abstained.

The debate was held at the same time as Mr Noonan told TDs in Dublin that he has not given up on a separate plan which would involve the European Stability Mechanism (ESM) in part covering the cost of rescuing AIB and Bank of Ireland.

"It's my fullest intention that the Irish people get their money back," Mr Noonan said.

He again questioned whether it would be better for the State to return AIB to private hands, either through floating it on the stock market or selling it to a bigger bank, or allowing the ESM to take a stake.

"I can see because our situation has improved so much that it's going to be more difficult to convince colleagues. And the market alternative might be better," he said.

"What I'm going to do is I'm going to pursue this line and I'm going to pursue the market alternative as well."

Mr Noonan was pushed by both Fianna Fail finance spokesman Michael McGrath and Sinn Fein's spokesman Pearse Doherty to make a formal application.

Mr McGrath said the minister knew in his "heart of hearts" that it was becoming increasingly difficult to secure a deal.

The minister said that when dealing with Europe, you need to act strategically.

The Finance Minister added that the scandal-hit Anglo Irish Bank did not cost taxpayers €31bn. But he did not put a figure on the bill for the now- defunct lender.

"I want to nail a point that (has been made) that there was €31bn of taxpayers' money fried in Anglo Irish Bank. There wasn't. That's mythology," Mr Noonan claimed. He suggested that as a result of the liquidation of the bank in February last year, the State will be able to recoup at least some of the money.

"It's a myth to say that the way things have worked out in the end that Anglo Irish cost the Irish taxpayer (about) €30bn. It didn't," Mr Noonan said.

The Central Bank was given bonds - money owed by the State - when the former Anglo Irish Bank was liquidated in exchange for allowing the toxic promissory note to be scrapped.

The State is expected to save €1bn a year in interest payments as a result of the deal to scrap the promissory note.

Mr Noonan also told the Oireachtas committee that as a result of record low interest rates, the State has made a €6bn paper gain on the long-term bonds that it holds as a result of the Anglo liquidation.

Irish Independent

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