Ireland winning battle to retain corporate tax rate
Finance Minister Michael Noonan received a commitment from his fellow EU finance ministers to deal with the issue at their level, rather than by member state leaders at their high-profile summits. He has managed to de-couple the issue from the cut in the interest rate on Ireland’s bailout loan and said that the only outstanding issue is when the interest rate reduction will come into force.
Mr Noonan had a one-on-one meeting with Germany’s Finance Minister Wolfgang Schauble, during the two-day event in Budapest.
Afterwards, Mr Noonan said his counterpart understood the importance of the interest rate cut in ensuring that Ireland could afford to pay back the loan, and grow the economy.
Mr Schauble told journalists that they were “still waiting for a gesture from Ireland” in relation to the interest rate cut.
Mr Noonan had his meeting with the French Finance Minister, Christine Lagarde sitting beside her in one of the long bus rides to the meeting place outside the capital city. Afterwards, she gave little away other than to say they had discussed “the whole tax landscape”.
Irish and EU sources confirmed that they had agreed to keep the tax issues at finance minister level where they will be less prone to French President Nicolas Sarkozy and Germany Chancellor Angela Merkel having to make populist statements to satisfy domestic audiences.
They also confirmed that the “gesture” Ireland would be expected to make will be to agree to engage in discussions on the Common Consolidated Corporate Tax Base (CCCTB). Ireland is emphatically against adopting this method of allowing companies with operations in several EU countries adopt the same method of calculating their tax.
Taoiseach Enda Kenny is already on record as saying they would engage in discussions on the CCCTB, adding that they would try to convince their colleagues that it would not work.
Germany and other countries are saying privately that they do not believe it will work either because it would be too complex to agree.
These concessions currently mean that while each country has a headline corporation tax rate, the tax collected is far less. The French rate is 33%, but the sums collected are close to 8%. Ireland has few concessions so the 12.5% rate works out at just over 11%.
Reducing the interest rate on Ireland’s EU loan of €40 billion is likely to come up at the next finance ministers’ meeting next month, after the EU/IMF/ECB reports on the country’s implementation of the austerity programme.
