Irish PM bullish on taxes
25.03.11 @ 16:52
BRUSSELS - Irish Prime Minister Enda Kenny has said the "Gallic spat" he had with his French counterpart at a meeting earlier this month is over but was bullish on maintaining Ireland's low corporate tax rate - the source of the original dispute.
"The Gallic spat we had the last time has certainly concluded. We shook hands several times during the course of this meeting," Kenny said, referring to the widely-reported falling out with president Nicolas Sarkozy on 11 March over Ireland's 12.5 percent corporate tax rate, the lowest headline rate in the EU.
The corporate tax rate has emerged as a faultline in discussions on lowering the interest rate (currently at 5.8%) on Dublin's €85bn EU/IMF loan. France and Germany have linked the two issues, considering the corporate rate to be predatory.
Ireland had been hoping for some sort of concession on the interest rate at this summit in return for more placatory talk on harmonising the tax system in the EU - a European Commission proposal (CCCTB) on making filing tax returns for companies in the EU easier.
However, the potential political leverage of manuoeuvre has been lost amid growing worries about the state of Irish banks.
Stress tests to be concluded next Thursday are meant to ease market fears. But some figures have predicted that the country's banks may be in a worse state than previously thought which could trigger a much higher-than-expected bail-out bill.
The current EU-IMF bail-out is to counter bad debt. The new bail-out would be to give day-to-day cash to the banks.
In a phone call with EU council president Herman Van Rompuy ahead of the summit, Kenny agreed that there would be no discussions on reducing the interest rate on the €85 billion loan until the result of the stress tests are clear.
The issue will now be dealt with by EU finance ministers, with the first meeting in two week's time.
Kenny reiterated that he is prepared to "discuss" the commission's paper on harmonising the tax system but he maintains a "very healthy scepticism" about the proposal.
This is a softening of previous language when Kenny said it would be tantamount to tax harmonisation through the back door. However, his stance on the corporate tax rate remained the same after the two-day meeting in Brussels.
"We are quite prepared once we get the clarity of the bank stress test to look at what we have to do but that does not include corporate tax rate."