The State has not been placed under any “direct or indirect pressure” to address European concerns over Ireland's 12.5 per cent corporation tax, Minister for Finance Brian Lenihan said today.
While number of EU member states raised the issue last week, Mr Lenihan said the Government had received “very clear assurances” from European partners that the measure was a domestic matter.
"Some member States last Tuesday did express the view that corporation tax should be looked at. We raised that issue in the interim and we have very clear assurances", Mr Lenihan told RTÉ's Morning Ireland.
“A statement from President Sarkozy, a statement from Chancellor Merkel and an acknowledgement confirmed to me yesterday by the French finance minister Christine Legarde that taxation is a domestic Irish matter,” he added.
"I think everyone realises that the Irish economy has to grow to get out of these difficulties and the only way we will grow is by attracting inward investment."
Fine Gael finance spokesman Michael Noonan claimed corporation tax was never up for discussion but instead was used as a “straw man” by the Government to “claim victory because it was never touched.”
“It was never on the table. That was a kind of a straw man invented by the government so that they could claim victory because it was never touched,” Mr Noonan told RTÉ.
“Three weeks ago when Commissioner Ollie Rehn was in Dublin, I asked him that question and he said tax rates were a matter for sovereign governments not a matter for the European Commission,” he said.
Mr Noonan said the British were “four-square” behind Ireland on the matter.
“We know that for years the British position is that from their own perspective on Europe that sovereign states should always be allowed fix their own tax rates and they’re maintaining that position and they’ll be four-square behind us on the 12.5 per cent [corporation tax rate] but for different reasons.
“And more recently, both Angela Merkel and President Sarkozy have indicated that as far as they are concerned, the 12.5 per cent is not on the table.”
In an interview this morning, Mr Lenihan also said that Irish banks would be downsized to meet real needs of Irish economy.
"Because of the amount of extensions they put on loans, because of the size of their loan book, because of the huge risks they took earlier this decade they became a threat not just to this State but to the euro zone itself," he said.
He said Ireland was in a very difficult market position, but said it was possible for the country to bring itself out of this. Mr Lenihan said Ireland not necessarily be out of bond markets for three years, and the bailout mechanism could allow it to return to the markets more quickly.
Cuts in social welfare and increased taxation are expected to feature in the upcoming budget, in addition to other expenditure reduction to achieve €6 billion in cuts.