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Irish Tax 'Not Negotiable' Says Kenny

by Robert Lee,, London

16 February 2011

Irish opposition leader Enda Kenny, who is currently leading the race to become Ireland's next Prime Minister, has told German Chancellor Angela Merkel that Ireland will not budge on the issue of corporation tax.

Fine Gael leader Enda Kenny met with German Chancellor Angela Merkel for forty minutes in Berlin on February 14, 2011, and made clear what he identified as "the priorities" from Ireland's "point of view".

Speaking outside the headquarters of Merkel's Christian Democratic Union party, Kenny told reporters that, on the subject of Ireland's 12.5% rate of corporation tax: "We would see no change in that for Ireland, it is absolutely fundamental to our tax base for foreign direct investment." He added that this position was made "perfectly clear to the Chancellor" and that "we could not concede any movement" on the issue.

Kenny's meeting with Merkel came as his party prepared to launch their election manifesto on February 15, 2011. The document, to be unveiled in Dublin, will outline the Fine Gael's strategy to "Get Ireland Working." The election, scheduled for February 25, is widely expected to produce another coalition government, with Kenny's party likely to be the larger partner in an arrangement with Labour. Recent polls conducted following a live five-way television debate between the leaders of the main parties have placed Kenny slightly ahead of the pack, with Labour leader Eamon Gilmore closely following behind. Labour's manifesto, published on February 13, 2011, also stated its pledge to retain the corporation tax at its current level.

These promises, and the predicted outcome of the general election, highlight the importance of Kenny's strong stance towards Merkel. Germany and France are currently seeking a "competitiveness pact" for the Euro zone, which would establish a minimum common corporation tax rate for the zone, but this latest meeting is a very clear sign of what, in two weeks' time, is expected to be the official position of a new Irish government.

This could cause friction, for, although Kenny argued that, if in government, Fine Gael would “not contemplate, in any circumstances moving” on the issue, the finance spokesman for Merkel's CDU party shortly afterwards reiterated its long-held commitment to effect alterations in EU tax systems. Michael Meister argued that change "would reduce administration costs with companies and member states and would, as a whole, make the EU more competitive". Furthermore, according to the Irish Times, leading German politicians were "surprised by Kenny's remarks". The Times claims to have seen an impending CDU paper which demonstrates the alleged unease felt by many at the belief that "their voters cannot reconcile Ireland’s low corporate tax with the German-led bailout".

It is thought that the new Irish government, likely to be in power by March 9, will come under almost immediate pressure from EU finance ministers pushing for a move towards the more harmonized system suggested by Meister yesterday.

TAGS: tax | investment | Ireland | corporation tax | tax rates | France | Germany

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