Irish News

Tuesday 29 July 2014

Taoiseach and Sarkozy in clash over corporation tax

Fionnan Sheahan Political Editor in Brussels

Published 12/03/2011|08:06

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Ireland' s counterpart Kenny talks with his Luxembourg' s counterpart Juncker and France' s President Sarkozy during an EU extraordinary leaders summit on Libya and North Africa in Brussels. Photo: Reuters

TAOISEACH Enda Kenny clashed with French President Nicolas Sarkozy last night in a "Gallic spat" over Ireland's corporation tax as Europe's heavy-hitters named their price for a bailout deal.

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Emerging from his first EU summit, Mr Kenny was confident of securing a 1pc reduction in the interest rate on the bailout at the end of the month.

The Taoiseach said there was acceptance of the principle made by Ireland that a cut in the bailout on the interest rate was necessary without any agreement on a deal.

BLOW-UP

But Mr Sarkozy and German Chancellor Angela Merkel ganged up on Mr Kenny, demanding a change to our corporation tax system in return for bringing down the interest rate.

Attending his first EU summit, Mr Kenny had a row with Mr Sarkozy after the French leader described Ireland's corporation tax regime as "harmful".

Mr Kenny said he had a "good, vigorous and vibrant" discussion with Mr Sarkozy.

"I'm not sure whether you would call it a Gallic spat or not but obviously the French President has very clear views about the corporation tax rate for quite some time -- and then, so have I," he said.

Mr Kenny refused to reduce the corporation tax rate saying it was an issue he "could not comtemplate". He also said a common corporation tax base across the EU "was harmonisation of the tax rates by the back door and this would be detrimental to Ireland and to Europe".

Mr Kenny said he was willing to engage in negotiation on what he described as the "language about tax policy" contained in the bailout agreement.

The European Commission is due to publish proposals next week on a common set of rules for the collection of corporation tax across Europe.

Finance Minister Michael Noonan will meet with European Central Bank President Jean-Claude Trichet on Monday and Mr Kenny will also have a meeting with him before the end of the month.

Mr Sarkozy and Ms Merkel also held a private meeting with Mr Kenny to put pressure on the Taoiseach over the corporation tax regime.

European Council President Herman Van Rompuy is also believed to have been involved in the discussion on the margins of the EU summit.

The European heavy-hitters are prepared to ease the burden of Ireland's bailout terms -- but only if the government compromised on the corporate tax base.

PRESSURE

Germany and France want to prevent companies from paying a lower rate of corporation tax in Ireland, without having a full operation in this country.

Those two countries are offering to be flexible on the EU- IMF package if there is a concession given on corporation tax.

Mr Kenny is insisting he won't give anything away on the Irish corporation tax -- neither the rate nor the base.

EArlier Mr Kenny got a round of applause from EU leaders as he attended his first summit last night but he was still told he will have to give something in return for deal on Ireland's bailout.

Mr Kenny asked for a reduction in the bailout interest rate when the crisis in the eurozone was discussed by the leaders of the 17 countries using the currency as Portugal edged closer to also requiring a rescue package.

The Taoiseach also spoke with US President Barack Obama, who congratulated him on his election and said he looked forward to meeting him next week for the St Patrick's Day visit to the White House. During an eight-minute telephone conversation, Mr Kenny recalled how he was in Denver, Colorado when Mr Obama was selected as the Democratic Party candidate for the US Presidency.

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