EU heavyweights such as France and Germany have been flexing their financial muscles in a bid to persuade Ireland to make at least a token increase in the corporate tax rate, in return for a degree of leniency in loan repayment terms ahead of the next EU summit.
The EU has decided to reduce the interest rate Greece will have to pay on their debt. This decision, according to José Manuel Durão Barroso, President of the European Commission, was not just a question of fairness to Greece, a nation he said was “making very important efforts.” It was also a matter of credibility of EU's policies, because it would assure the sustainability of the repayment of the debt.
“I am personally persuaded that the same kind of flexibility, including possible revision of the interest rate, will be also open for Ireland,” commented Mr Barroso.
Ireland's corporate tax rate
Mr Michael Devane, Executive Vice President of Quilly Consultancy and a member of the Board of Directors of the American Chamber of Commerce of Ireland, spoke in Dublin recently about the importance of Ireland's low corporate tax rate in attracting overseas companies to locate in Ireland.
The chamber’s role is to represent the US foreign direct investment base in Ireland, though it also has Irish companies as members who invest in the US. Mr Devane said that foreign direct investment in Ireland from the US represented 600 companies with over 100,000 people employed.
The chamber has an agenda, said Mr Devane: “It is about securing and holding on to the investment that we have; it is the principal objective that we have.
“Central to that is protecting the Corporate Tax regime that we have in Ireland,” he said.
He explained that the chamber looked at the headline rate of 12.5 per cent and the effective tax rate in Ireland to make sure we stayed competitive in an international sense, thus ensuring that Ireland continues to win foreign investment.
“Our mantra inside the chamber here has always been ‘Tax, Talent and Competitiveness’,” said Mr Devane.
Multinationals and their take on the tax issue
Mr Paul Rellis, Managing Director of Microsoft Ireland, told the Epoch Times how important the corporate tax rate was for Ireland. He said, “The tax thing is important, it is a key compensative factor, but it's not the only factor … anything that impacts our competitiveness negatively is not a good thing.”
Commenting on the same question, Ms Louise Phelan, senior director for global customer services & EU merchant services at PayPal European operations, said: “Anything that impacts us, whether it is the 12.5 per cent, whether it is costs in general, all of these impact our sustainability in Ireland.”
Ms Phelan continued by saying that her customers were not necessarily concerned with what the corporate tax rate was in Ireland: they were just concerned with the service they received, so while the tax issue was important, it was not the only reason why PayPal were located in Ireland.
“Yes, it's a factor [corporate tax rate], but it’s not the be-all and end-all. The be-all and end-all to me is my people, my workforce, and to make sure they can serve my customer, to make sure my customer stays with me,” said Ms Phelan.
Newly elected Dublin South TD and chartered accountant, Peter Mathews, spoke out this week with respect to French President Sarkozy's comments on the Irish corporate tax rate. Mr Mathews believes that the average effective corporation tax rate in the European Union is 13 per cent when write-offs are taken into account.
“Ireland is crystal clear about our corporation tax rate. The headline rate is 12.5 per cent and the effective rate is 11.9 per cent.
“France is one of the most misleading countries when it comes to corporation tax. It claims to have a corporation tax rate of 34.4 per cent. However, through the use of accountancy smoke and mirrors, French companies end up paying an effective corporation tax rate of just 8.2 per cent. Three quarters of their tax rate disappears.
“It is misleading and unfair of Nicholas Sarkozy to call for an increase in Ireland’s corporation tax rate. He is trying to victimise Ireland for being upfront about the taxes we charge businesses.
“This flies in the face of the founding principles of the European Union. There should be solidarity between member states in times of crisis,” said Mr Mathews.
