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‘Merkozy’ urge common taxes ahead of EU summit

In their submission to the European Council ahead of the EU leaders’ summit tomorrow, Angela Merkel and Nicolas Sarkozy outline proposals to harmonise corporation tax and impose a new financial transaction tax.

Image: Remy de la Mauvinere/AP/Press Association Images

Updated 6.50pm

FRANCE AND GERMANY have urged eurozone countries to adopt a common corporate tax base in a letter published ahead of tomorrow’s crucial EU summit in Brussels.

The call for a common corporation tax base as well as a financial transaction tax is contained in a letter to European Council president Herman Van Rompuy which has been leaked to the media and first appeared in the French newspaper Libération.

Taoiseach Enda Kenny would be expected to oppose the move to harmonise corporation tax. He has not yet outlined the government’s position on the Franco-German proposal but he told the Dáil earlier today that plans to solve the debt crisis could be adopted without a treaty change.

This evening, the Fianna Fáil leader Micheál Martin called on the Taoiseach to reject the Franco-German proposal, saying it would not solve the eurozone debt crisis.

The Franco-German letter (in English here) calls for greater fiscal consolidation among the eurozone nations in order to enforce budget discipline and prevent the kind of contagion that has gripped the markets which fear the single currency is close to collapse.

The issue of corporation tax is crucial for the Irish government which has committed to maintaining the country’s low rate of 12.5 per cent, something France has long opposed.

Sarkozy had previously called for the rate to be changed in exchange for a reduction in the interest Ireland pays on its EU-IMF bailout, a reduction eventually secured with compromising the tax rate.

Among the measures outlined in the Franco-German letter are for a “common legal framework fully compatible with the internal market”, this framework would cover:

  • financial regulation
  • the labour market
  • the convergence and harmonisation of corporate tax bases
  • the introduction of a financial transaction tax or so-called Tobin tax

The Tobin Tax is also a controversial measure which has divided opinion within the EU. Britain is resistant to it with George Osborne describing it as “economic suicide” for Europe, the New York Times reports.

In Ireland alone, the coalition parties are divided on the issue.

The Labour Party was in favour of it being imposed at a United Nations level during the election while Fine Gael said it would damage economic growth and harm job creation in Ireland. There is no mention of the tax in the programme for government.

Fianna Fáil said this evening it opposed a financial transaction tax warning it would “decimate” jobs at the International Financial Service Centre in Dublin. Martin said:

At the core of their proposals is a dramatic increase in central control of national budget policies, including a common corporation tax base which would immediately cost Ireland billions.

“On the other hand, the package completely ignores the need for a deep reform of the ECB and policies which have driven countries into bailouts rather than stopping them from being necessary,” he added.

EU plans to end debt crisis could be adopted ‘without treaty change’ – Kenny >

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