19th Nov 2017

Rehn predicts end of Ireland's low-tax regime

  • Mr Rehn says Ireland is unlikely to be able to keep its low-tax regime (Photo:

With its record budget deficit, Ireland will not be able to keep its low taxes and will become a "normal tax country in the European context," economic affairs commissioner Olli Rehn said Friday (1 October), prompting an angry response from large American corporations based on the island.

"It's a fact of life that after what has happened, Ireland will not continue as a low-tax country but rather it will become a normal tax country in the European context," Mr Rehn said at a press conference following an informal meeting of finance ministers.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

He was answering a question regarding the inclusion of Ireland's rate of corporation tax in efforts to increase tax revenues. But he also stressed that the matter was for the government and parliament to decide.

Ireland is struggling to reduce its budget deficit to 3 percent of its gross domestic product by 2014, after it emerged that bank bailouts have widened the public deficit to a massive 32 percent of GDP.

Under the rules of the eurozone, the defiict has to be kept below 3 percent, but the financial and economic crisis has seen most countries surpass that threshold.

Dublin's favourable tax regime for big corporations - currently only 12.5 percent - will remain "a cornerstone of Irish industrial policy," a spokesman for the ministry of finance told Dow Jones news wire.

His comments came after the American Chamber of Commerce in Ireland urged Prime Minister Brian Cowen to "categorically rule-out" EU pressure on corporate tax.

"At a time when the economy is in deep recession, nothing which would impact on the continued investment in Ireland by our existing base of multinationals, or would deter new investment in Ireland can be countenanced," the chamber said in a statement.

"This is a very serious issue. We have to realise that we are still way out of line in terms of our cost competitiveness, and Ireland's competitive corporation tax rate is one of the few competitive advantages we have," it added.

The bulk of the record deficit is due to government bail-outs of the country's ailing banks, such as the Anglo Irish Bank, still unable to recover from the financial crisis. Competition commissioner Joaquin Almunia said that he was in favour of Ireland asking bondholders in Anglo Irish Bank to share some of the cost of the bail-out.

"This is in line with the Commission's principles on burden sharing since it both addresses moral hazard and limits the amount of aid, with benefits to the taxpayers," Mr Almunia said in a statement.

EU officials have frequently raised the issue of greater tax harmonisation in Europe, with a recent report by ex-commissioner Mario Monti identifying tax divergences as a damaging factor to the internal market.

Euro doomsday scenario

In addition to Ireland's woes, other euro-countries such as Spain are heading to a "death spiral" of high unemployment and an economic slump, leaving few chances for the common currency unless Europe does more to help member countries, Nobel Prize winning economist Joseph Stiglitz has said.

In an extract from an afterword to his book "Freefall", published in the Sunday Telegraph, the former World Bank chief economist also said it could only be a matter of time before Spain is attacked by speculators.

"The euro zone needs better economic cooperation, not just the kind that merely enforces budget rules, but cooperation that also ensures that ... when countries experience large adverse shocks, they get help from others," he wrote.

Mr Stiglitz, who won the Nobel prize in 2001, said the euro lacked the institutional support it needed to make it work, but argued the single currency could be saved by the exit of Germany from the euro zone or the division of the euro zone into two sub-regions.

"If Europe cannot find a way to make these institutional reforms, then it is perhaps better to admit failure and move on than to extract a high price in unemployment and human suffering," he said.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

EU commission wants 'credible' tax haven blacklist

The EU's finance commissioner Pierre Moscovici told reporters that he wants a credible EU blacklist of tax havens following the latest media tax avoidance revelations of the wealthy elite in the Paradise Papers.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

News in Brief

  1. Bonn climate talks extend into Friday evening
  2. UK needs to move on Brexit by early December, Tusk says
  3. Puigdemont extradition decision postponed to December
  4. Ireland wants written UK guarantees to avoid hard border
  5. US did not obstruct climate talks, says German minister
  6. EU signs social declaration
  7. Puigdemont to be heard by Belgian judges
  8. Steep fall in migrants reaching EU

Stakeholders' Highlights

  1. European Jewish CongressAntisemitism in Europe Today: Is It Still a Threat to Free and Open Society?
  2. Counter BalanceNew Report: Juncker Plan Backs Billions in Fossil Fuels and Carbon-Heavy Infrastructure
  3. Nordic Council of MinistersNordic countries prioritise fossil fuel subsidy reform
  4. Mission of China to the EUNew era for China brings new opportunities to all
  5. ACCASmall and Medium Sized Practices Must 'Offer the Whole Package'
  6. UNICEFAhead of the African Union - EU Summit, Survey Highlights Impact of Conflict on Education
  7. Nordic Council of MinistersNordic Council Calls for Closer Co-Operation on Foreign Policy
  8. Swedish EnterprisesTrilogue Negotiations - Striking the Balance Between Transparency and Efficiency
  9. Access EuropeProspects for US-EU Relations Under the Trump Administration - 28 November 2017
  10. World Vision20 November: Exchange of Views at the EP on Children Affected by the Syria Crisis
  11. Nordic Council of MinistersSustainable Growth the Nordic Way: Climate Solutions for a Sustainable Future
  12. EU2017EEHow Data Fuels Estonia's Economy

Latest News

  1. EU keeps former Soviet states at arm's length
  2. EU leaders make pledge on social issues after populist backlash
  3. EU agencies and eastern neighbours This WEEK
  4. Germany slams Dutch call for more ambitious EU climate goal
  5. Mind the gap: inequality in our cities
  6. Climate activists 'disappointed' with EU at climate talks
  7. Davis outlines UK vision on Brexit in Berlin
  8. German coalition talks in near collapse