EU Denies Asking Ireland To Hike Its Corporate Tax Rate

THE EU INSISTS that Taoiseach Enda Kenny was not told to consider increasing Ireland’s corporation tax rate in exchange for an adjusted interest rate on Ireland’s bailout.

The Irish Examiner cites senior sources within Brussels who said Kenny was asked to “engage constructively in the question of tax co-ordination” – but denied that this was a direct request for Irish movement on the corporate tax rate.

It was only Kenny’s interpretation of this request that had implied the 12.5 per cent rate was on the table.

The Examiner says a government spokesperson denied this, however, insisting that the gesture was an obvious demand for tax harmony – which would have meant adjusting the 12.5 corporate tax rate which has been the hallmark of Ireland’s foreign investment success.

Kenny was unhappy with such a request, the spokesman said, given that it came after progress had been made on lowering the bailout rate – and after the 1 per cent reduction had already been confirmed for Greece’s European bailout fund.

Greece’s reduction, however, in exchange for a government commitment to proceed with a €55bn ‘fire sale’ of state assets.

Friday’s discussions on the topic, which included French president Nicolas Sarkozy and German Chancellor Angela Merkel as the main proponents of an Irish tax increase, were described as “long and difficult”.

Last night, Noonan’s predecessor as Fine Gael leader John Bruton insisted to business leaders in New York that the corporate tax rate would remain intact at 12.5 per cent.

The disagreement may undermine any more recent progress made on the matter in recent days; yesterday Kenny’s new finance minister Michael Noonan met Jean-Claude Juncker of the European Central Bank, in a meeting Noonan said “went well”.

Their discussions focused on the recapitalisation of Ireland’s banking system, Noonan said, with the finance minister conceding that the sector might need more than the €10bn that had been earmarked by his predecessor Brian Lenihan.

If this was the case, Ireland would need to access the portion of the EU-IMF bailout fund earmarked for such a prospect.

Additional reporting by Aoife Barry


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