Corporation tax - We cannot surrender on tax rate

JUST as, in another time, Irish republicans regarded England’s moment of difficulty as Ireland’s moment of opportunity there are those in Europe who, it seems, regard our economic collapse as an opportunity to try to force us to change our corporation tax rates.

They must think again.

This week’s Exchequer returns – just for the first nine months of the year – showed that we spend almost €13bn a year more than we collect in taxes. So, anything that might threaten these revenue streams must be opposed. The returns also showed that corporation taxes brought in more than €2bn, €235m more than expected at this point in the cycle. Corporation tax accounted for 10% of revenues, so the argument that the 12.5% rate damages revenues does not hold water.

These are just the top-line revenue issues. When you consider that almost 200,000 jobs are supported by foreign companies working in Ireland only because of our corporation tax rates a fuller picture emerges.

The magnitude of the issue was underlined by the American Chamber of Commerce in Ireland when they reacted strongly to the high-tax comments of Commissioner Ollie Rehn. They said the Taoiseach must categorically rule out any increase in corporation tax rates.

Lionel Alexander, president of the ACCI, pointed out that US companies employ over 100,000 people in Ireland and have invested over €165bn. In 2008 they contributed €3bn to the exchequer including 40% of the total corporate tax take. There was a further €13bn in terms of payroll, goods and services.

Former president of the European parliament Pat Cox has joined the debate. Referring to the second vote on the Lisbon Treaty he pointed out that: “Nothing in the Treaty of Lisbon makes any change of any kind, for any member state, to the extent or operation of the competence of the European Union in relation to taxation.”

That seems clear enough.

Mr Cox also reminded us of a speech made just over two years ago, at the height of the second Lisbon campaign. President of the European Commission, Jose Manuel Barroso was speaking in Limerick.

“The other member states have listened to the reasons why so many people voted ‘no’ last time and have responded with solemn, legally binding guarantees to meet these concerns. I hope that these will have laid to rest any fears people might have had and that the way is now clear for Ireland to vote ‘yes’ on 2 October.”

Included in those “solemn, legally binding guarantees” was an acceptance that we would remain in control of our tax affairs. Though things have changed utterly those commitments are binding and are not negotiable. That seems clear enough too.

It is understandable though that there is a certain degree of frustration in Europe with how our collapse has made us once again so dependent on the support of more prudent governments but that does not mean that we can be denied one of the few tools we have to rebuild our economy.

We may have to accept Commissioner Rehn’s perspective by changing how we tax ourselves but we cannot surrender something that has such a role to play in rebuilding this country.