Low corporation tax rates in the Republic of Ireland, which are opposed by some European Union countries, were defended strongly yesterday by the Taoiseach following questions from leading Mexican business people.

Speaking during a five-day trade mission, Mr Ahern said he would continue to tell EU colleagues that they should be more concerned with the revenue raised by taxation, rather than focusing solely on the tax rates.

"We have proven that low, competitive tax rates generate more activity, a better future and a better system. A few years ago, we cut Capital Gains Tax from 40 per cent to 20 per cent and quadrupled the income."

During an address to a breakfast meeting hosted by Enterprise Ireland, Mr Ahern acknowledged that other EU member-states remained deeply unhappy about Ireland's 12.5 per cent Corporation Tax rate. "I have an ongoing battle with my EU colleagues. If they have inefficiencies in their economies, they should act on them. I have always defended Ireland's rates, and I will continue to do," he declared.

Highlighting the existing links between Ireland and Mexico, the Taoiseach said trade was now seven times larger than it was in 1990. Last year, Irish-based companies exported $600 million (€568 million) worth of product to Mexico.

Both countries have experienced "dramatic and rapid industrial development" in recent years provoked by a switch from protectionism to trade liberalisation, which has encouraged inward investment.

Already, he said, Ireland had brought its research and development levels up "from a very low level" to the EU average, and more would have to be done to keep Ireland competitive, he told a breakfast gathering hosted by Enterprise Ireland. Emphasising that Mexico was a major target for Irish companies, he said: "Some might say that we should be spreading ourselves across numerous areas and countries. But we are a small country. The reality for us is that we will always be a small country. But that doesn't mean that we cannot be great. It isn't possible for us to spread our resources," said the Taoiseach.

Pointing out the advantages for the Mexican business community of Ireland's membership of the EU, Mr Ahern said the EU would add 10 new member-states next year.

"Europe is changing. We are very aware of that. And it will change fundamentally twice over the next decade. By 2007, Romania and Bulgaria will have joined. And Turkey will do later, if with some difficulty."

In return, Mexico offers Irish companies the opportunity to benefit from Mexico's membership of the North American Free Trade Agreement, and its place as a key hub for the Latin American economy.

"There is clearly scope for Irish and Mexican companies teaming up to open up new markets, particularly in Central America and the South American hemisphere," Mr Ahern declared.

Introducing the Taoiseach, a leading Mexican businessman involved in the Irish/Mexican Chamber of Commerce, Mr Carlos Rojas, said Mexico had much to learn from Ireland's "economic miracle" of recent years.

And the business links can be improved. "It isn't fair that we drink so much Bushmills and Paddy and you don't drink tequila," said Mr Rojas jokingly, who is a key ally of the Mexican President, Mr Vicente Fox.

During a speech at an official dinner hosted by the Mexican President, the Taoiseach said both countries had "experienced emigration and the special demands of a very young population.

"Such factors bring a responsibility to develop special economic policies to meet the needs of the people. Economic development and social justice must be an inseparable aspect of any modern democratic government's political agenda," he said.