Luxembourg blasts rate of corporation tax in Ireland

Ireland’s low tax rates for companies were the subject of criticism from the Luxembourg prime minister who demanded “fair competition” within the EU.

Speaking following a meeting with Taoiseach Leo Varadkar, prime minister Xavier Bettel took aim at what he saw is the unlevel playing field in tax rates in some EU countries.

Without directly referencing Ireland’s 12.5% corporate tax rate, Mr Bettel said it is politically untenable to have workers charged up to 45% in tax when companies pay little or no tax at all.

“The fact is, competition is good but it must be fair,” he said. “Competition is good within the EU. I prefer to have my competitor in the EU. It is important to have a level playing field and an international level playing field. This is the most important topic.

“Neither the Irish or Luxembourg accepts that a company pays no taxes. The fact is we want fair competition between countries. We don’t want to be harming Europe. How should I explain to someone working eight hours a day paying 45% in tax at the end of the month when another company is paying no taxes. In the end I will have political problems if I support the view that some companies should pay no taxes.”

Responding, Mr Varadkar said competition between EU countries is good and said any solution to the major tax avoidance by large companies must be dealt with at a global level.

“When it comes to Ireland and Luxembourg, in terms of financial services, we are competitors as well as countries who co-operate,” said Mr Varadkar. “We compete for a market that exists. The one mistake we don’t want to make is to lose that market.”

Mr Varadkar said he would prefer to see a solution reached at OECD level, and while such a deal may take longer, he said this was preferable to making a mistake.

“If the EU gets digital taxation wrong what we will do is disadvantage the EU as a whole and hand a gift to our competitors,” he said. “The best way is to deal with it through the OECD on a global basis. It does take longer but I think it is better to take longer than to get it wrong.”

On Thursday, the secretary general of the OECD, Angel Gurria, will be in Dublin to speak at a conference on international tax policy.

“This year the conference expands its remit from solely tax policy to other areas of interest to the department and its stakeholders, such as SME investment and productivity,” said the Department of Finance.