Gilmore bids to reassure Merkel’s heir-apparent

Ireland’s corporation tax rate was in the sights of the man most likely to succeed Angela Merkel as German chancellor when he met Tánaiste Eamon Gilmore in Berlin.

Peer Steinbruck, the Socialists’ candidate to lead the party in next year’s election, also said he doesn’t personally believe in using EU funds to pay down bank debt.

He was deeply critical of Ireland’s generous corporation tax, blaming it for Germany losing income from German companies, when he was finance minister in the previous coalition government with Ms Merkel.

The Tánaiste tried to reassure him that Ireland’s tax rate of 12.5% — the second lowest in the EU — posed no threat to Germany, in a speech he made in Berlin yesterday.

Ireland is not like Germany, it has a small population and to thrive needs to continue to attract investment from abroad, he said.

Over 1,000 multinationals are based in the country and last year was a record for inward investment. “This is not a threat to Germany or to our other partners in Europe — there are more jobs in Irish companies operating in Germany than there are in German companies operating in Ireland.

“In fact, in many instances we are competing for mobile investment with other parts of the world and not with our fellow European,” said Mr Gilmore.

Mr Steinbruck said he favoured harmonising company taxes across the EU, but that did not mean we should all pay the same rate. Instead, he said, tax corridors were needed.

The former finance minister has railed against Ireland’s system which allows firms headquartered here to ‘lend’ money to their sister firms in Germany that can then be offset against their tax liability there.

Mr Steinbruck said he did not personally favour the direct recapitalisation of banks with EU funds, and would prefer this to be done by a special bank resolution fund.