Harney Hits Back Over KPMG Partner's Tax Increase Suggestion

by Robin Pilgrim, for LawAndTax-News.com, New York

06 April 2004

Ireland's Tanaiste, Mary Harney announced at the weekend that she was "amazed" at comments made by KPMG tax expert, Paul McGowan last week with regard to corporate tax harmonisation within the European Union.

Speaking at a conference in Dublin, Mr McGowan suggested that Ireland should agree to an EU-wide minimum corporate tax level, in order to avoid becoming a victim of tax competition from the 10 new EU states.

He argued that, in view of the fact that the Republic is set to compete with accession states with corporate tax levels which in some cases are lower than its own, the Irish government might be wise to take a more conciliatory approach to countries such as France and Germany, which are advocating corporate tax harmonisation.

"When Ireland, Luxembourg, Cyprus, Malta and the other accession states simultaneously attack the job market and tax revenues of the high-tax states and these states are not permitted to defend themselves, will matters reach breaking point?" he asked.

The KPMG senior tax partner went on to suggest that Ireland should sign up to an EU-wide minimum corporate tax level, on the understanding that the country's tax rates are not then challenged for the next 25 years. "If the rate we negotiate is the lowest permitted in the EU, what we would have done is ensure that we ourselves cannot become victims of tax competition," he explained.

Responding to Mr McGowan's remarks, the deputy prime minister announced that there was "no question of throwing in the towel" on corporate tax harmonisation. She went on to add:

"We have allies in Europe who think the same way about low taxes and I am confident that we will win the debate."

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