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FG to table corporate tax motion as Europe sets sights

Enda Kenny will try to handcuff the government into keeping the 12.5% rate amid stiff opposition in Europe.

Image: Julien Behal/PA Wire

FINE GAEL will move a Dáil motion next week seeking to safeguard Ireland’s corporation tax rate of 12.5%, fearing the government would allow the rate to be hiked under the terms of an international bailout.

Speaking in Donegal where he is canvassing for by-election candidate Barry O’Neill, party leader Enda Kenny said the low rate “is a cornerstone of Ireland’s economy, and will play a crucial role in rebuilding the country.”

The Irish Times adds: “The survival of the 12.5% rate will be crucial for retaining thousands of jobs in multinational companies based in Ireland.”

Furthermore, reports the Irish Independent:

There are genuine fears that the Fianna Fail/Green Government will sacrifice our 12.5pc corporation tax rate as part of its bailout negotiations.

While the government has remained adamant that the hallmark rate is non-negotiable – with enterprise minister Batt O’Keeffe, Tánaiste Mary Coughlan and finance minister Brian Lenihan all insisting that the 12.5% will be maintained – the prospect appears likely that the rate could come under attack from other Eurozone members, who believe Ireland’s most prevalent competitive advantage should be the cost of needing foreign aid.

The Financial Times believes French and German officials to be keen on forcing an increase in return for the European Central Bank’s assistance, while Bloomberg quotes Austria’s finance minister as specifically tying the rate to the prospect of overseas assistance.

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The Wall Street Journal’s Simon Nixon, however, reckons Ireland would ultimately win what he calls the “game of bluff” on whether the corporate tax rate will need hiking.

“Eventually, the market will succeed in pressuring policy makers into the response it is seeking,” he writes. “In this case, the market wants Germany and the other leading European economies to agree a quick deal to assist Ireland and, if necessary, Portugal…

“In this scenario, Ireland can afford simply to stand firm and wait for Germany inevitably to fold.”

About the author:

Gavan Reilly

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