MEPs denounce corporation tax rate

FRENCH and German MEPS have once again raised the spectre of the contentious Irish corporation tax rate after they issued a declaration denouncing the Irish rate and calling for a minimum EU rate of 25%.

The eight MEPs are highly influential, all being co-ordinators for the different political groupings in the parliament.

The declaration asks for signatures from other MEPs and if it can gather the support of 368 MEPs, it will be deemed the official position of the European Parliament.

Describing the Irish tax rate as “unfair”, it says it runs counter to the spirit of European solidarity, especially in light of Ireland’s €85 billion bailout.

The declaration concludes: “We urge the European Commission to advance on the dossier of a Common Consolidated Corporate Tax Base. We urge the European Commission, the Eurogroup and its members to ensure that the corporation tax rate will be increased to the average EU level of 25% in a spirit of solidarity.”

Irish MEPs have reacted furiously to the declaration as these MEPs, as co-ordinators on the Economic and Monetary Affairs Committee (ECON), represent the political groups of which they are members.

Last night, Sean Kelly MEP described the move as “a legally and politically bogus attack on Ireland’s corporation tax rate”.

“I have taken swift action against this attack and will launch a counter written declaration to stop them in their tracks. This is a battle we must win,” he said.

A spokesman for the influential ECON committee acknowledged the dispute, but insisted that the MEPs had issued the declaration in their personal capacity, and not as co-ordinators.

Meanwhile, markets punished major eurozone countries, Spain and Italy for the second day as fears spread that Ireland’s bailout will solve nothing as low growth prospects and high interest rates will make repaying even more difficult.

Major figures in the EU tried to calm the situation with the European Central Bank president saying there were too many voices speaking for Europe and not enough clarity on decisions made by the member states.

ECB president Jean-Claude Trichet had a sobering message for Ireland when he told MEP Gay Mitchell that the EU could not be blamed for Ireland’s overheated economy and housing bubble.

All eurozone countries knew they were in a currency set up to deliver price stability in the euro area as a whole and so it was up to individual countries to make the necessary adjustments at national level. “We could not change to take into account the needs of Germany… nor adjust to take account of the singular problems of Ireland or Spain,” he said.

But time looked dangerously not on the side of the euro last night as the cost of debt for Spain, Italy, Portugal and Belgium reached a record high and even that of France rose while the value of the euro dropped against all but two of its 16 most-traded peer currencies.

Some of the pessimism was being blamed on the low growth rates for the EU released earlier this week by the European Commission. They cut almost in half the Government’s growth forecast for next year.

Some economists say that at this low rate of 0.9%, the bailout interest rate of 5.8% is much too high for the country which paid an average of 4.5% to borrow on the markets over the past year. This, they argue, means that Ireland is now virtually insolvent together with Greece.

Growth rates for Spain, Portugal and Italy were also downgraded in the Commission forecast, heightening fears further.