IRELAND’S 12.5 per cent corporate tax rate was “a red line issue” and the Government would not entertain any undue pressure to change it, Minister for Finance Michael Noonan told the Dáil last night.

“Let me be very clear,” said Mr Noonan. “The 12.5 per cent rate is not a quid pro quo for any element of the pact for the euro.”

That message, he added, had been given and heard loud and clear and he could assure the House there would be no deviation from that position at this week’s European Council meeting.

Mr Noonan was speaking during the resumed debate on a Fianna Fáil Private Members’ motion seeking to retain the corporate tax regime.

Ireland, he said, had always been prepared to work with the European Commission and other member states on tax policy issues and the Government had no problem in reiterating that fact.

“However, we will be ensuring that it is clearly understood that the co-operation is strictly on the basis that taxation is a matter of national competence and that the principle of unanimity is fully respected,” he added.

Mr Noonan said a lot had been said about the difference between headline tax rates and effective tax rates. “We have no axe to grind about the effective tax rates available in other countries but merely wish to point out that the effective rates are more material to the debate on tax competition than headline rates,” he added.

Fianna Fáil finance spokesman Brian Lenihan expressed concern about a Government amendment to the motion referring to a “constructive and forthright engagement with all of our European partners on this issue”.

He asked what constructive engagement meant and what signal it would send to those who wanted to invest in Ireland.

The Government, said Mr Lenihan, could not leave the door open for participation in a common consolidated corporate tax base.

He said he was disappointed that the House would divide on the issue. “Of course, we fully support the Government on whatever exertions they are making on this question in Europe,” he added.

“But the fact remains the issue is about the common consolidated corporate tax base and not about the rate of tax.” An amendment endorsing Government policy was carried by 98 votes to 40.