Belfast Telegraph

Ireland will never give up tax rate, says expert

By Clare Weir

A tax expert has said that France and Germany will have to wrestle the Republic of Ireland's low corporation tax from the country's "cold, dead hands."

His comments followed the latest proposals from French President Nicolas Sarkozy and German Chancellor Angela Merkel at a crisis summit in Paris which include the introduction of 'tax harmonisation' as a new measure to stabilise the struggling Eurozone.

Eamonn Donaghy, head of tax at accountancy firm KPMG's Belfast office, said that rather than take the pressure off Northern Ireland, the calls should prompt our politicians to fight harder to lower the rate here from 26%.

Mr Donaghy said that the proposal is "nothing new" and was a statement of long-term political aspiration rather than a concrete and definite solution to the crisis.

"There are all sorts of agendas at play here and Germany and France have most to lose at this stage," he said.

"This threat has been made before, but tax harmonisation in reality is a long way off and would only happen if things got really, really bad.

"Let's remember that the Eurozone was in trouble back in October and November yet since then the Republic has continued to create jobs, increase tax returns and battle back.

"It is no way in the same league as Portugal, Greece or even Spain any more and I think that Merkel and Sarkozy would have to pull the low tax rate out of their cold, dead hands.

"This fight back being staged by Ireland in the face of the economic downturn should make Northern Ireland even more determined to lower its corporation tax rate."

But anti-poverty campaigner and blogger Richard Murphy said that harmonisation was "inevitable" and called for Ireland to "stop looting other European economies".

"There is no way this tax competition can continue while the Eurozone is so desperate for cash, it is now not a case of 'if' but 'when'," he said.

"Ireland will be picked on, it can bluster all it likes but harmonisation will happen. We must question why Northern Ireland is so desperate to copy a system that is doomed to fail and does not work.

"Ireland has already had preferential treatment, it is time for Ireland to grow up and play its part in the international economy and to stop looting other European economies."

A Treasury paper entitled 'Rebalancing the Northern Ireland Economy' closed for consultation in July. The document investigated the possibility of the local Government being able to set its' own tax rates.

Campaigners in favour of a lower rate of corporation tax here say that the move will help attract more foreign direct investment and therefore more money and jobs.

26%

The current corporation tax rate throughout the UK, which Northern Ireland hopes to reduce to 12.5%

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