EU summit: Government will only have days to save corporate tax
Published 05/02/2011 | 05:00
The incoming government will only have days to fight off proposals to dismantle Ireland's vital 12.5pc corporate tax rate with EU leaders now hoping to all but settle the issue in mid-March.
A new government is likely to be elected on March 9, but a vital debate on harmonising corporation tax rates will take place just days after this, possibly thrusting Enda Kenny into a vital meeting with huge economic consequences for Ireland.
All the preparation work and discussions before that will be handled by Taoiseach Brian Cowen, regarded by many of his EU partners as a lame duck.
French president Nicolas Sarkozy raised temperatures last night by calling on Ireland to consider "moving closer" to EU rates on corporation tax, which are far higher than the Irish rate. He was speaking at an EU leaders' summit.
The French president said what he wanted to see was rates "moving closer together, rather than further apart''. However, he said that he didn't want to be specific "on our Irish friends' corporate tax".
Mr Sarkozy has made several inflammatory statements about Irish business taxation since the €85bn bailout deal was agreed in November, effectively warning the Government that it can't expect to undercut its paymasters on business tax.
In a nearby room, Mr Cowen was saying no proposals had yet been laid before the Irish government. "No proposal was put to us in relation to these matters today," said Mr Cowen.
The issue of corporation tax and other measures relating to competitiveness will now be broached with countries by two key EU leaders, Herman Van Rompuy, president of the EU Council and Jose Manuel Barroso, president of the EU Commission.
Asked would he be dealing with these negotiations, Mr Cowen said: "The Government of Ireland is led by me until a new government is formed." However. Mr Cowen insisted the 12.5pc rate was a matter for Ireland itself and remained a cornerstone of the country's industrial policy.
Ireland was assured that the EU would keep its hands off corporation tax as part of a deal to secure a Yes vote on the Lisbon Treaty.
But Mr Sarkozy has thrown tax harmonisation into the mix as part of a Franco-German drive to beef up economic integration across the 17-member eurozone.
The "pact for competitiveness" outlined by the French and German leaders during the summit also includes recommendations for caps on how much debt a country can run up and a hike in retirement ages.
Meanwhile, the IMF said it would discuss Ireland's €85bn bailout package after the election but, crucially the Washington-based organisation has given no commitment to change key economic targets in the programme.
EU sources yesterday also expressed serious doubts about whether the EU Commission would allow any dilution of the current targets.