No one way road to financial solidarity, EU tells Ireland

March 15, 2011

, BRUSSELS, Mar 15 – German Finance Minister Wolfgang Schaeuble and EU economic affairs chief Olli Rehn urged Ireland Tuesday to be realistic and drop opposition to raising a corporate tax rate critics say is unfairly low.

"If Ireland wants something additional from us, than we can raise that issue," said Schaeuble of Dublin\’s demand for the interest rate on its EU and IMF bailout to be reduced, in line with the easier terms granted to Greece last Friday.

The German minister was recalling a clash between Irish Prime Minister Enda Kenny and French President Nicolas Sarkozy on the issue at last week\’s eurozone summit that is sure to be revisited at a full European Union summit next week.

"This can\’t stay like this," Schaeuble said of Ireland\’s 12.5-percent corporate rate, one of the EU\’s lowest, adding that US Treasury Secretary Timothy Geithner had complained during a conversation that too many American companies choose to base themselves in Ireland for tax reasons.

"Solidarity is not a one-way-road," Schaeuble added after talks among EU finance ministers in Brussels.

Rehn also urged Dublin to take a "constructive" approach to plans aimed at for a single business taxation regime across Europe.

The issue will return on Wednesday when the EU\’s taxation commissioner Algirdas Semeta puts forward new EU-wide tax proposals.

Rehn noted that the tax issue was not part of Ireland\’s 67.5-billion-euro international bailout agreed with the EU and International Monetary Fund in December.

At the same time, however, he acknowledged "some relation" between the tax stance and Ireland\’s failure to secure a one-percentage point reduction in the interest rates it pays on its rescue package, as did Greece.

"It is very important the EU works further on tax coordination," Rehn said, adding that Semeta\’s proposals for a Common Consolidated Corporate Tax Base were "very reasonable and gradual … in terms of harmonising tax systems across the EU.

"I would only encourage a constructive approach by Ireland on policies related to taxation, especially the commission\’s proposals on CCCTB," Rehn said.

In the works for the past 10 years, the plan would allow companies to use a single EU tax regime to calculate taxable profits instead of having to deal with different national systems.

Ireland\’s low corporate tax rate helped to fuel growth in what was once known as the Celtic Tiger and the Kenny\’s government says that level must be maintained to help its recovery from the financial crisis.

But partners see it as unfairly low. The average corporate tax rate in the 17-nation eurozone stands at 25.7 percent. It is 34.4 percent in France and 29.8 percent in Germany — although Irish critics say a generous system of allowances in those countries means the headline gap in rates is wholly misleading.

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