EU pressure mounts to hike corporate tax rate
But as Taoiseach Brian Cowen said farewell to his fellow EU leaders last night, he ensured that this hot potato would be the among the first his successor would have to deal with.
Leaders agreed to postpone a special eurozone summit for four days until March 9, when Mr Cowen told them there should be a new government in Ireland — just two days after the Dáil meets to form a new government.
Mr Cowen, who is retiring from politics, poured cold water on claims by his expected successor, Fine Gael’s Enda Kenny, that he could renegotiate the EU-IMF agreement and the interest rate on the loans.
The latest attack on the country’s 12.5% company tax came amid a competitiveness pact for all 17 euro area countries proposed by France and Germany to the summit in Brussels. The fact that the two countries agreed such a pact without consulting other countries drew a lot of hostility from many leaders.
But French President Nicolas Sarkozy made it quite clear he was not going to give up his battle to force Ireland to get closer to France’s 34.4% rate.
“Convergence does not mean we have to be absolutely identical. But it does mean we must strive for comparison and move closer together rather than further apart,” he told a press conference after the day-long meeting.
When asked if he was referring to Ireland, he said: “I don’t want to be specific on our Irish friends’ corporation tax.”
Jose Zapatero, the Spanish prime minister, said that as far as he was concerned issues such as tax, wages, retirement ages and pensions — which the pact says should be harmonised — should be part of any plan to ensure the euro area became more competitive.
“Its absolutely logical,” he said after the meeting.
German Chancellor Angela Merkel discussed the pact with him in Madrid earlier in the week.
Mr Cowen told the meeting that under the EU Treaties tax was a matter for each member state and that the EU had no power in this area. Any attempt to change this could be vetoed by any member state.
Ireland is, however, moving closer to the idea of agreeing a common tax base which would mean that companies with branches in a number of member states could have their tax calculated according to one method.
This has been seen as the thin end of the wedge by the Irish Government. Last night the Taoiseach said that while they have been sceptical of the Common Tax Base idea, they are waiting to see the proposal from the European Commission due shortly. “We will have to wait and see what the proposal is,” he said.
But Mr Sarkozy sees this as just a first step.
“We should agree at least on a basis, a common base for corporation tax, so that comparisons are possible and perhaps to move towards convergence,” he said.
Council President Herman Van Rompuy and Commission President Jose Manuel Barroso have agreed to discuss the Competitiveness Pact idea with member states — which will be with Mr Cowen in Ireland’s case — before the special eurozone summit on March 11.
