Ireland Stands Firm Against EU On Tax

by Jason Gorringe, Tax-News.com, London

07 October 2010

The Irish government has rejected the statement of EU Commissioner for Economic and Monetary Affairs, Olli Rehn that Ireland will be forced to adopt higher tax rates - in particular a hike to its treasured 12.5% corporate tax rate - as the country grapples with its double figure deficit in coming years.

Rehn said, at an informal meeting of EU finance ministers, that it was a "fact of life" that Ireland could no longer maintain its appeal as a low tax country, stating that "Ireland would instead will become a normal tax country in the European context." His comments came as ministers discussed the challenge that faces Ireland in its commitment to achieving a deficit below 3% by 2013.

Rehn did however state that he had no precise stand on the matter, and that ultimately decisions surrounding the Irish corporate tax rate’s future lie with Ireland’s decision makers.

In a statement responding to Rehn’s comments, the Irish government said that it was unwavering in its commitment to maintaining the Irish corporate tax rate at 12.5%, despite the major pressure on public finances.

At the beginning of this month, the American Chamber of Commerce in Ireland warned that any hike to the corporate tax rate would be a "deal breaker," causing multinationals to reconsider placing their headquarters in Ireland.

Head of the organization, Lionel Alexander, was quoted by Eircom as stating:

"I think it would be a very negative signal to our corporate headquarters if we chose to move the wrong way with the corporate tax rate here in Ireland. I don't think it would be accepted."

"My hope is that we keep to the commitment of holding the rate at 12.5%. Significantly, for any new investments coming in, it would be a deal breaker."

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