Agreement has been reached with the EU Commission on the phasing out of the 10 per cent rate of Corporation Tax for manufacturing and some internationally traded services, the Minister for Finance confirmed.

He told Fine Gael's finance spokesman, Mr Michael Noonan, that a single 12.5 per cent rate of Corporation Tax would generally apply from the year 2003.

However, some existing projects would retain the 10 per cent rate until 2005. Certain IDA and International Financial Services Centre (IFSC) projects approved at the end of July would retain the 10 per cent tax rate until 2005, as would Shannon. A few manufacturing and some internationally traded services would be entitled to the 10 per cent tax rate until 2010.

Mr Noonan asked if there was any quid pro quo sought such as a demand that a 20 per cent DIRT tax would apply generally. Mr McCreevy said the two matters were entirely different.

"There is no spillover to other areas," he said. These latest negotiations were proving very difficult, but there was no connection.

He pointed out that there was a great European interest in and focus on the various tax mechanisms in Ireland because of Ireland's economic boom, but negotiations on the issues were separate.