Geoghegan-Quinn: Corporation tax a matter for Government

FURTHER assurances were offered yesterday that there would be no change in Ireland’s corporation tax rate unless the Government decides so.

EU Commissioner Máire Geoghegan-Quinn said that any decision to raise corporation tax will be a matter for the Irish Government.

“The Commission is not dictating to Ireland what it should do in any area of policy,” she said.

Finance Minister Brian Lenihan was forced to rule out any increase to our corporation tax rate last week after the EU’s Economic and Monetary Affairs Commissioner Ollie Rehn said it was a “fact of life” that Ireland could no longer continue as a low-tax country but would become a “normal-tax country”.

Although he said he did not wish to take a stand on the corporation tax issue, which he said was for the country to decide, he said he would “not rule out any option at this stage”.

Also yesterday Christopher Pryce, a director at Fitch Ratings, said the Government is ‘‘determined” to avoid a bailout, as it may be conditional on the country raising its corporation tax rate of 12.5%.

Ireland’s corporation tax rate is one of the lowest in Europe and has been a major incentive in encouraging companies to locate here.

Head of tax at KPMG, Shaun Murphy, said some coverage suggested that the comments from Mr Rehn were made in the context of “moves towards EU corporate tax harmonisation”.

“The Commissioner for Tax has already stated that any harmonisation proposal will not include a proposal to harmonise corporate tax rates,” he said.

“It is clear that the Government must now work closely with the European Commission with respect to the budgetary measures which Ireland is taking over the next four years and all indications are that the Government is firmly committed to doing this,” he added.

Mr Murphy said Ireland’s corporation tax rate has been central to the real growth in our economy in the late 1990s and early 2000s and central to growth in the decades before that. “The 12.5% rate is a key determinant in attracting new investment since the beginning of 2010, 55 new foreign direct investment projects have been publicly announced by the IDA,” he said,

“We strongly support the Government’s unequivocal and immediate re-affirmation of Ireland’s 12.5% corporation tax rate,” he added.