CORPORATION TAX:SOME OF the European pressure on Ireland's corporation tax regime is easing as taoiseach-in-waiting Enda Kenny prepares for a battle in Brussels to reduce the interest rate on bailout loans.
Mr Kenny travels to Helsinki on Friday to meet German chancellor Angela Merkel and other centre-right leaders as they seek a united stance on bailout fund reforms before a euro-zone summit next week. Although the 12.5 per cent corporation tax rate has come under forceful attack from Dr Merkel and French president Nicolas Sarkozy, diplomats say the minimum tax rate is off the agenda as EU governments renew efforts to agree reforms to the euro-zone bailout fund.
However, draft proposals for a euro-zone “competitiveness pact” take note of imminent European Commission legislation to harmonise the corporation tax base. Dublin remains opposed to such measures, but they are deemed less damaging than a minimum tax rate. The 12.5 per cent charge is seen as vital to the effort to revive Ireland’s economy, but harmonising the tax base would dim its lustre by lessening scope for international companies to maximise profit recorded in Ireland.
EU leaders asked commission chief José Manuel Barroso and European Council president Herman Van Rompuy to formulate new measures after earlier proposals from Dr Merkel, largely backed by Mr Sarkozy, met a storm of resistance. While the original plan referred to a common tax base, she startled Irish officials last week when she called on the EU to impose rules to keep corporation tax rates within a certain range.
The incoming taoiseach has pledged to campaign for a lower interest rate in the negotiation of bailout fund reforms and to compel the holders of unguaranteed senior bank bonds to bear losses on their investments.
EU economics commissioner Olli Rehn brushed off the senior bank issue when questioned yesterday by The Irish Times, but said the interest rate was a core issue. “We have a common goal for Ireland to revive its growth dynamics and succeed in ensuring its debt sustainability,” he said. “Pricing policy – I am referring to the interest rates – is one key issue here, which will be discussed in the context of the comprehensive strategy of the European Union. I expect that this issue of pricing policy will be looked at from the overall European perspective of safeguarding financial stability in the euro area . . .”
Mr Rehn said the authorities looked forward to supporting “the next Irish Government” in the execution of the EU-IMF rescue plan. The programme was “key for Ireland’s economy and its revival”.
