Irish tax rate blow as Europe demands ‘level playing field’

The European Commission has delivered a fresh blow to Ireland’s 12.5% corporate tax, demanding a “level playing field” among EU states.

Ireland has long been criticised by some of the larger EU countries over its low corporate tax rate and the commission is clearly on a collision course with the Government on the matter.

In comments to the Irish Examiner, president Jean Claude Juncker’s office said the commission is demanding “more transparency around each member state’s tax system and effective rates”.

The comments came after Finance Minister Paschal Donohoe insisted Ireland’s 12.5% rate would not be changed.

While stating that tax rates are an area of national sovereignty and that it has no intention of interfering with that, the commission qualified that commitment by demanding greater harmonisation between the 27 member states.

“This means fairer tax competition — no hidden rulings or special regimes — and a level playing field for all businesses in the Single Market. This is what is captured in the president’s state of the union speech yesterday,” the spokeswoman said.

Mr Donohoe will face pressure to relinquish the low rate when he meets his counterparts this weekend.

He will warn his European counterparts today that Ireland’s 12.5% rate is protected by EU treaties and that this country “will not participate” in potential changes.

Speaking on RTÉ Radio before a European finance ministers’ meeting in Estonia, and as Fine Gael’s pre-Dáil think-in began, Mr Donohoe said Government will resist fresh attacks on the Irish tax level.

“Our stance on corporation tax of 12.5% and the development of things like a knowledge box and how we manage patents is an entirely legitimate and entirely sustainable policy choice for small, open economies like Ireland to take,” he said.

“Let me be very clear and be very explicit about this, I and this Government will not participate in any decision that changes our ability to protect our national interest on key issues like that.”

At a later media briefing, Education Minister Richard Bruton said the existing EU treaties make it “very clear” that tax rate changes are “not a competence of the EU, that is a competence of individual member states”.

Fianna Fáil and Sinn Féin last night said Government is right to resist any fresh attack on the tax rate.

Meanwhile, in Brussels, Justice Minister Charlie Flanagan said Brexit had the potential to affect Ireland “more than any other EU state” in terms of security due to the threat from dissident republicanism.

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