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Friday 23 February 2018

Kenny forced to repel fresh EU attack on corporate tax

Public throws its weight behind burning of senior bondholders


Taoiseach Enda Kenny defended Ireland's low corporation tax rate, which is under fresh attack this weekend, in his key meeting with EU Council President Herman Van Rompuy on Friday, the Sunday Independent has learned.

It has been confirmed that the issue of Ireland's corporation tax rate was part of the discussions during the meeting on Friday between Mr Kenny and Mr Van Rompuy.

Mr Kenny's spokesman confirmed the issue was discussed but that the government's position was made clear. "The government's position was reiterated, we're not for moving," he said.

Mr Van Rompuy's spokesman said he supports Ireland's call for a better interest rate on the bailout. But it is believed the Commission president's "support" is based on the need to conclude a deal which would see some concession by this country on European harmonisation of corporation tax base rates.

One expert said yesterday this would have "some downside" for Ireland. Following Finance Minister Michael Noonan's announcement that he intends to burn senior bondholders at Anglo Irish Bank, there is renewed pressure on Ireland to give way on the corporation tax rate in return for a better bailout deal.

With the Irish government's repeated refusal to budge on the corporation tax rate, France, in particular, has blocked any progress on a reduction.

Ahead of key meetings today and tomorrow between European finance and foreign affairs ministers in Luxembourg, France is again insisting there will be no reduction in our bailout interest rate unless we surrender on our corporation tax rate, European sources said.

European Central Bank sources, contacted by the Sunday Independent, expressed their deep surprise at Mr Noonan's announcement, while others went further describing it as reckless, given how precarious the Greek situation remains.

Mr Noonan and Tanaiste Eamon Gilmore both travel to Luxembourg later today for meetings with our European counterparts. While Ireland is only expected to be at the periphery of the official agenda, the corporation tax issue is set to come under fire.

Yesterday, Luxembourg Prime Minister and head of the eurozone finance ministers group Jean-Claude Juncker said that a Greek bankruptcy "could prove contagious for Portugal and Ireland, and then also for Belgium and Italy because of their high debt burden, even before Spain. We are playing with the fire".

According to the latest Sunday Independent Quantum Research nationwide poll, a large majority, 69 per cent, of the Irish people support Mr Noonan's plan to burn senior bondholders. Respondents said we need to adopt radical action if we were ever to extricate ourselves from our debt problems.

"It's time someone in power did something! We have to fight our own corner because no one else will," said one male respondent.

In contrast, 31 per of those polled did not support Mr Noonan's plan. Some thought it was too late to do this now, others felt that such action would just create fear and panic in the financial system and that we would be viewed as pariahs by the international financial community.

Despite the support for Mr Noonan in his bid to burn the bondholders, many of them, 65 per cent, don't think he will succeed. Respondents thought he would be forced by the ECB, IMF and EC to get in line and stop sabre-rattling.

A small majority, 55 per cent, say we should voice our anger in a similar fashion to the Greeks. Some 45 per cent of respondents thought it would be counter-productive to act in the same violent manner and that culturally it was not in our make-up to behave in this way. There was agreement that we should protest more, but that it should be done in a peaceful and dignified manner.

But the majority of respondents felt that this was the only way the rest of Europe would take us seriously. In many people's minds it was simply a case of 'he who shouts loudest gets heard'.

Sunday Independent

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