“Corporation tax is now mentioned as a quid pro quo”

Encouraging noises are one thing, but at the first EU late nighter of Taoiseach Enda Kenny’s tenure the BBC reports some possibly premature tweeting from EU President Herman Van Rompuy.

In a message on Twitter, Mr Van Rompuy had initially said: “We have an agreement on the Pact for Euro.”

The message was later amended to: “Update from ongoing meeting: Agreement in principle on the Pact for the Euro, but still discussing the other elements of the package.”

A pact would give members a say over each other’s major economic policies – a move aimed at keeping countries under firm fiscal discipline.

Any agreement would need to be endorsed at a summit of all 27 EU states on 24-25 March.

The RTÉ report adds that

Discussions among the 17 leaders of the eurozone ran into the early hours of Saturday morning, and were described by diplomats as ‘intense and difficult.’

Greece accepted a 1% reduction of its [loan] interest rate and was also granted an extension of the repayment period from four to seven-and-a-half years.

But Ireland has not been granted a reduction in its loan interest rate… yet.

Taoiseach Enda Kenny said he refused the offer of a 1% cut in the €67.5bn EU/IMF bailout interest rate because of the lack of agreement over Ireland’s corporate tax regime.

However, he said the reality of a 1% interest rate cut for Ireland had now been accepted.

The disagreement partly revolved around a so-called ‘Pact for the Euro’ and the role EU tax policy would play in the pact.

The pact is designed to improve competitiveness, employment and public finances within the eurozone, following a year long crisis facing the single currency.

The broad outlines of the pact were agreed by eurozone members last night, but the details won’t be concluded until a summit at the end of March.

Mr Kenny said negotiations would now have to continue intensively over the next two weeks, and they would include a meeting between Minister for Finance Michael Noonan and the president of the ECB Jean-Claude Trichet in Brussels on Monday, with a further possible meeting between the Taoiseach and Mr Trichet in advance of the 24-25 March summit.

And from today’s Irish Times, Arthur Beesley on “one of the main talking points at the meetings”

Diplomats observing the talks described very sharp “tit-for-tat” exchanges between the Taoiseach and French president Nicolas Sarkozy.

Diplomats also said that German chancellor Angela Merkel expressed scepticism about Mr Kenny’s request.

“Corporation tax is now mentioned as a quid pro quo,” said a source from third-party member state.

The source said Mr Sarkozy was quick to question why the Taoiseach was looking for a lower interest rate when it was open to him to raise Exchequer revenues by increasing the 12.5 per cent corporate tax rate.

“Sarkozy asked for a gesture on corporate tax. Kenny said I cannot give you a gesture on corporate tax. That led to a whole wider discussion,” another diplomat said.

The French leader, who clashed who clashed with Mr Kenny’s predecessor Brian Cowen at the last EU summit five weeks ago, pointed out to the Taoiseach that Ireland was receiving many billions of euro from its partners.

Mr Kenny had gone into the meeting insisting he was not prepared to increase in the Irish tax rate or to accept a common corporate tax base.

The game is, indeed, afoot.

, , , , , , , , , , , ,

  • Mack

    Swapping corporation tax for a lower interest rate on the bail out loan is hairbrained. Maybe a gesture on corporation tax (or support for some form of Consolidated Corporation Tax Base) might make sense in the context of large scale debt forgiveness (including guaranteed banking debts).

    Expect salaries to fall in Belfast, folks, as huge numbers of experienced southern workers, managers & professionals begin looking for alternative employment that doesn’t involve uprooting their families to England, America or Australia…

  • Mark McGregor

    Pete,

    Let’s remind ourselves the EU pledged before the acceptance of Lisbon that:

    Nothing in the Treaty of Lisbon makes any change of any kind, for any Member State, to the extent or operation of the competence of the European Union in relation to taxation.

    If Ireland was to consider a European role in setting tax, surely another referendum is required?

    Here’s the document. I can’t see how a new government would fancy a potential High Court challenge from the shinners on breaking the Constitution in it’s first weeks.

  • aquifer

    “Expect salaries to fall in Belfast, folks, as huge numbers of experienced southern workers, managers & professionals begin looking for alternative employment that doesn’t involve uprooting their families to England, America or Australia…”

    Don’t worry, Conor Murphy is limiting the speed of the Belfast Dublin enterprise train to prevent that kind of thing. We don’t want a prosperous county uniting ahead of time and putting Sinn Fein on the dole.

  • tuatha

    MarkMcG – that must have been in the clause that promised cream cakes for all & fairies at the bottom of the garden, at least as credible.