Belfast Telegraph

French plan low blow over Republic's corporation tax

By Shona Murray and Fionnan Sheahan

French President Nicolas Sarkozy is planning an attack on the Republic's low corporation tax in EU negotiations on new budgetary rules.

Taoiseach Enda Kenny will face another battle to defend corporation tax, which the French government has repeatedly targeted.

A senior French official said yesterday corporation tax was "on the table" as the new deal, called the fiscal compact, agreed by EU leaders last weekend is hammered out in detail.

Corporation tax was not mentioned as an element of the deal in Brussels at the weekend.

The Irish government has pledged to engage with proposals by the European Commission on a common tax base, but claims the corporation tax system in the Republic is protected.

However, the chief of staff to the French European affairs minister said while his government understands corporation tax is a "key element" of the Republic's system and the recovery, there cannot be "too much divergence".

Christoph Parisot said: "The fact is it's one of the key subjects on the table. There are proposals from the Commission already, and if it can be sped up, let's try do it because this is something we will have to do.

"At the same time, there are really important things to be done. We all need to keep to our words and just try to work as constructively as possible, knowing that it is always going to be very difficult to have 26 common policies in all areas and that every country will want to keep a type of specificities but, at the same time, we cannot have too much divergence into things.

"There is certainly going to be a tremendous impetus for trying to go as far as possible in all areas."

Mr Kenny insists no decision can be made yet on whether a referendum is needed to ratify the new deal. Fianna Fail leader Micheal Martin said, from a political perspective, the country needed a referendum, while Sinn Fein president Gerry Adams said it was a bad deal for Ireland.

Mr Kenny said he raised the case for reducing the cost of the Republic's bailout of its banks with European leaders at last week's summit. "I presented the case, the challenge that is now faced by the Irish people, where this country borrowed €63bn (£53bn) for bank recapitalisation at excessive interest rates before the bailout," he said.

"We should now be able to use the current facilities that are available under the EFSF, and will be available under the ESM, to get into a position where we can pay off that at lower interest rates over a longer period with a very substantial saving for the Irish taxpayer," he added.

Mr Parisot countered that EU members wanted to be "balanced and fair with all countries" and said the Republic had already received concessions on the bailout.