Bruton: Low corporation tax vital to economic recovery

IRELAND’s low rate of corporation tax has been vital to the country’s economic development “before the EU even came into being,” former taoiseach , John Bruton told a gathering of international business leaders in New York last night.

He assured delegates at an Ireland Day conference in the New York Stock Exchange that Ireland would use its veto to prevent any moves by the EU which would result in an increase of the 12.5% rate.

Mr Bruton said the position taken by the French President Nicolas Sarkozy to force changes of the rate in return for a reduction in the interest rate paid on the EU share of the EU-IMF bailout makes “no sense”.

“Our corporation tax regime is one of the things that helps us to repay loans that we have taken out from the EU and elsewhere. It would be quite perverse to insist that we were to abandon that policy because that would frustrate our capacity to repay the loans which we are determined to do.”

He believes the rate will remain untouched. “Our corporation tax regime is a way that has proven itself to be effective in raising money. If we are to pay money, we have to raise it.

“And corporation tax, in its present form, is proportionately one of the best ways of earning the money we need to earn to repay the loans we have undertaken.

“It makes sense from everybody’s point of view to leave this system as it is.”

The former Fine Gael leader who is now the president of the IFSC, said the policy was first adopted in 1956. “Before the European Union came into being, before Sarkozy was even born, Ireland had a low corporation tax to attract foreign direct investment and that has been the basis for our economic model ever since.”

Executives from hundreds of US corporations attended the conference hosted by NYSE, Business and Finance and the Irish American Business Association.

Speaking afterwards, Mr Bruton said the position taken by France and Germany was “to some extent a piece of theatre”. He said when countries where workers are paid lower incomes are lending us money, “they’ve got to justify that to their constituents back in their own countries.

“President Sarkozy has to show to his constituents in France that he is not giving away money easily.”

Mr Bruton again criticised the European Central Bank for failing to take action to prevent the credit bubble taking place in Ireland.

Since 1992, it had the power to issue instructions to the Irish Central Bank if it was unhappy about anything that was happening in relation to credit, finance or capital movements.

“While it is the case that the ECB and the financial regulator were remiss in Ireland, during the period from 2000-2006, throughout that period, the ECB, if it wasn’t happy with what was happening, it had the power to issue instructions to the Irish Central Bank to rein in the situation.

“If they didn’t do that, they have to take responsibility for some of what has happened.”

Mr Bruton also said the new Programme for Government is “explicitly supportive” of the financial services industry.

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