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Rehn Urges 'Normal Tax' Policies On Ireland

by Jason Gorringe,, London

10 November 2010

European Economic and Monetary Affairs Commissioner, Olli Rehn, arrived in Dublin for two-day talks with the Irish government and opposition on November 8, in an attempt to achieve multi-party consensus on Ireland's fiscal plan, which is set to save EUR6bn in 2011, rising to EUR9bn by 2014.

Speaking during his visit, Rehn said that he foresees Ireland being required to surrender its low tax status to bridge the gap between its revenues and expenditures. On this issue he called on Irish parties to achieve consensus on the future make-up of Ireland's fiscal regime.

The government has insisted that, despite its retrenchment efforts, the Irish corporate tax rate, of 12.5%, will remain intact. The rate has long been a primary driver for multinationals to locate their headquarters within the territory.

While Rehn insisted that the European Commission remains on-side as Ireland endeavours to tackle its deficit, he said that talks with Finance Minister, Brian Lenihan were 'substantial and frank', and the EU Commissioner's recommendations that Ireland should adopt "normal tax" policies is further evidence that as far as the EU is concerned, the days of low corporate tax in Ireland are numbered.

Previously, opinion was voiced in the European Parliament that should Ireland need a Greek-style bailout, the country should in return be forced to increase corporate tax. In a joint statement released in September, two MEPs, Markus Ferber, and Sven Giegold, argued that: “If Ireland needed the European Resolution fund, [Ireland’s] corporate tax rate has to be doubled. Moreover, Ireland has to give up its opposition to European cooperation in tax policy. [A situation cannot arise wherein] Ireland benefits from the common measures supporting the Euro but at the same time hampers other member states' collection of taxes.”

TAGS: tax | business | European Commission | Ireland | fiscal policy | international financial centres (IFC) | budget | corporation tax | offshore | corporate headquarters | multinationals | Europe

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