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Monday 5 December 2016

'Suicide' if we give in to EU on taxes

'No surrender' insists Enda Kenny. 'Stand up to Merkel' says McDowell

JOHN DRENNAN and Daniel McConnell

Published 13/03/2011 | 05:00

An overwhelming majority of Irish people have endorsed Taoiseach Enda Kenny's refusal to budge on Ireland's corporation tax rate during intense clashes with German and French leaders Angela Merkel and Nicolas Sarkozy.

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Any climbdown by the Taoiseach on the issue would represent a case of "economic and political suicide", Michael McDowell, the former Progressive Democrat leader, said yesterday.

According to the latest Sunday Independent/Quantum Research Poll, 78 per cent of people think Mr Kenny was absolutely correct to refuse to offer "a gesture" to Mr Sarkozy in terms of our corporation tax rate in return for more favourable rates on the €85bn IMF/EU bailout.

People polled on Friday night saw the Irish corporation tax rate as the 'bedrock' of our multinational employment base and export figures.

Further details of the heated exchanges during the meeting emerged yesterday. Mr Kenny played heavily on his huge mandate from the Irish people that no move on the 12.5 per cent corporation tax rate was acceptable to the Irish people.

One senior government source said Mr Kenny "fought back against Mr Sarkozy's disingenuous arguments" and that he will "stand tough" no matter what pressure is brought to bear.

Mr Kenny made it clear that the "targeting" of Ireland in this manner was "unfair" and that Ireland required assistance to ensure its recovery.

Michael McDowell in today's Sunday Independent writes: "Sarkozy deserves a gesture -- but a gesture involving two digits and no other numbers.

Mr McDowell said that any relenting by Mr Kenny and his Government to the pressure from Europe would be disastrous.

He added: "The attitude shown by Sarkozy and Merkel is predictable. France and Germany want to impose a uniform corporate tax regime across the EU. It is simply a question of exercising a demand for more power.

"Corporate tax harmonisation would attract more and more corporate activity to the heart of the union and away from the geographical periphery like Ireland," he said.

But political observers believe Mr Kenny will need all the support he can get on the issue in the wake of the Franco-German-led attempt to persuade Ireland to increase its corporation tax in a trade-off for easing the crippling terms of the IMF/EU bailout.

"It is a unique attack on a newly elected national leader," said one government minister yesterday, who described it as "an onslaught from the Franco-German alliance."

"Sarkozy just can't dictate to Ireland; our low corporation tax rate has created thousands of jobs in this country" said junior minister Michael Ring.

MEP Marian Harkin described it as a "lot of hot air" and said that France's "effective" corporation tax was actually lower than Ireland's.

Leading figures in business have also called on Mr Kenny to defend the corporation tax rate at all costs, and say he should threaten to leave Europe if they continued to exert pressure.

International aviation tycoon Ulick McEvaddy said it was crucial for Ireland to retain one of the few competitive advantages it had.

"We are a small island on the edge of Europe, we need some advantage in order to attract companies here," he said.

"We need to stand up and realise we have an excellent hand to play in the negotiations. The interest rate should be 3.2 per cent, not the rate it is (5.8 per cent on the EU part of the bailout loan).

"The corporation tax rate was one of the main reasons I opposed the Lisbon Treaty the first time around. We then got the guarantee on it.

"But let us also remember who our biggest trading partner is. Britain, and we are one of theirs. I'm sure they would be willing to bring us back into the sterling area," he said.

"We should examine linking back in with sterling if they continue to go after us. The bottom line should be 'treat us properly or we're out of here into the sterling zone'."

UCD economist Karl Whelan said: "It would not be the end of the world" if the Irish corporate tax rate went up by 2 or 3 per cent. The real danger would be if all European rates were made the same -- leaving Ireland at a very big disadvantage.

"The worry is if they harmonised with the rest of Europe. But we are asking a lot from them too, so something will have to give," Mr Whelan said.

The Sunday Independent/ Quantum Research Poll has found that a huge majority are against conceding on the corporation tax rate.

"It is a disgrace that large, powerful countries such as Germany are putting pressure on us.

"The question we have to ask ourselves is: How much control will Germany have over Ireland? This is a truly terrifying notion," said one respondent.

It is also one of the few things the Government "has full control over", having already ceded functions such as setting interest rates to the EU.

The poll found that 22 per cent felt the Government could concede on the corporation tax rate in return for concessions on the bailout terms. They believed it was the only "gambling chip" left in our attempt to restructure the debt.

"We might have to let it go, otherwise we will be in recession for 20 years trying to pay back our debts," said another respondent.

Sunday Independent

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