Noonan battles to save 12.5% tax rate

THE gloves have come off in Ireland’s fight to keep its corporate tax rate and win a cut in the amount of interest the country is paying for its €67 billion bailout.

Finance Minister Michael Noonan yesterday fired a shot across the bows of the French in Brussels, highlighting that the average amount of tax their companies pay is just a quarter of the official rate of 33%.

“If the debate is to continue, I will be pushing that it takes into account the effective rates rather than the nominal rates because nobody pays the nominal rates as far as I can see,” said Mr Noonan.

In a World Bank survey of corporation tax, Ireland was the country in Europe that had the smallest differential between the headline rate of 12.5% and the amount actually paid, which was 11.9%.

At the same time, Mr Noonan worked to win support from smaller eurozone countries, in particular for what Mr Noonan fears will be a major battle at the EU summit on Thursday and Friday.

He had the full support of Energy Minister Pat Rabbitte, who said taking money from the banks’ bondholders was and is still firmly on the table, but tax rates are not negotiable.

Europe Minister Lucinda Creighton said there is a lot of sympathy for the Irish position from other EU members and the European Commission, but warned there may be no decision this week on the issue.

“There is a clear recognition around the table that the current arrangement is too much. We are getting a very positive response and there is a sense of solidarity in the EU that is palpable, from both large and small member states,” she said, adding there was no appetitive to interfere with tax rates as they were a purely national responsibility.

But she admitted she could not predict what the attitude of French President Nicolas Sarkozy will be at this week’s summit, following his insistence Ireland must raise its corporation tax rate earlier this month.

The ministers, in Brussels for meetings on the new Euro bailout fund, Libya and nuclear energy after the Japanese crisis, said they accepted Ireland will have to offer some concession in return for a cut in the interest rate from 5.8% to 4.8%.

Mr Noonan said he would have no problem offering a fiscal control package that would include putting a limit on government debt and deficits in the future.

Ms Creighton said Ireland had already said it was willing to engage in closer dialogue on the issue of corporation tax base without agreeing to adopt it, and other member states might be willing to accept this as a quid pro quo for a cut in the interest rate. But there is a fear that with Taoiseach Enda Kenny having turned down a similar proposal at the summit last week, other leaders may not be willing to put it back on the table.

Mr Noonan said he did not expect Mr Kenny will have the final figures from the bank stress tests at the meeting to show how much more than the planned €10bn they will need, but expected the sum to be “very high”. There is a fear the figure will be €10bn more. Mr Rabbitte said: “The difficulty for the Government is what is the tipping point.”

Mr Noonan also met ECB president Jean-Claude Trichet, who he hopes will agree to commit more permanent support to the Irish banks and give them more time to reduce in size.

EU finance ministers have agreed the details of the European Stability Mechanism, the bailout fund that will replace the one from which Ireland has borrowed. It will provide funds to countries to buy out their debt at reduced rates, something that could benefit Ireland eventually.



Lifestyle

Outside the box: A tale of two Calais and suffering beyond reason

Opening Lines: I feel sorry for the dogs. Even they have a sense of shame about having to poo in public

New TV show highlights lack of cycle lanes in Ireland in comparison to rest of Europe

Online Lives: Creator of popular health and lifestyle blog Sarah Dwan

More From The Irish Examiner