Belfast Telegraph

Irish finance Noonan chief vows to make £2bn spending cut

Republic insists it won't budge on corporation tax rate despite calls

By David Elliott

The Republic's government has shown it is determined to impress international money markets by pledging to introduce another €2.5bn (£2.1bn) of spending cuts and tax hikes over the next year.

But Irish finance minister Michael Noonan insisted there would be no change to the region's 12.5% corporation tax rate, which has been cited as attracting inward investment away from Northern Ireland.

German Chancellor Angela Merkel and some other European Union leaders had put pressure on Mr Noonan in recent days to raise its corporation tax rate which is far below that of other countries in the union.

But he was adamant the Republic would remain an attractive destination for foreign direct investment.

"Countries are increasingly competing more and more aggressively for mobile foreign direct investment," said Mr Noonan. "I want Ireland to play fair – as we have always done – and I want Ireland to play to win.

"That is why I will continue to examine ways in which Ireland can ensure that our corporate tax regime remains competitive."

Campaigners in Northern Ireland, including the Executive, have asked Westminster to devolve corporation tax-setting powers to Stormont so our current rate of 25% can be cut to 12.5% to compete with the Republic.

Aside from standing firm on tax, Mr Noonan also introduced an annual €150m (£126m) levy from next year until 2016.

By the time the levy is passed into law, the Republic will have left the EU and IMF bailout programme.

"We will have closed this chapter of Ireland's history that began for most of us with the governor of the Central Bank announcing to the Irish public that the country would be forced to turn to the lenders of last resort," he said.

"There will be no promissory notes, there will be no Anglo Irish Bank and there will be no bank guarantee."

Although on track to do without the €67.5bn (£57bn) European Union and International Monetary Fund loans by the end of 2013, Mr Noonan showed in his annual budget there would be no let up in the country's harsh austerity measures which have now lasted six years.

Considered the biggest austerity programme of any EU or other country, the cuts are still shy of the €3.1bn (£2.6bn) called for by the EU and IMF but Mr Noonan said the current round, one of the smallest since 2008, will help Ireland's budget fall to 4.8% in 2014 from 7.3% currently, below that set out in its bailout agreement in 2010.

And despite the widespread cuts, the budget has won plaudits for stimulating growth, particularly the 9% rate of value added tax for the hotel and tourism sector and the removal of air travel tax, according to commercial property consultants CBRE.

"There were several measures introduced in today's Budget which will help stimulate job creation in the Irish economy that will in turn benefit the construction and property sectors which are already showing some signs of improvement," said Marie Hunt, head of research at real estate advisors CBRE.

Belfast Telegraph